Final answer:
The statement that an increase in sales tax rate would directly raise the marginal cost curves for California businesses is false. While a higher sales tax affects consumer prices, it does not change the costs of production for businesses, which are represented by the marginal cost curves. Tax incidence depends on the elasticity of demand and supply, not on changes to a business's marginal costs.
Step-by-step explanation:
If the State of California raised the average state consumer sales tax rate from 9.25 percent to 15 percent, then this sales tax will have its heaviest impact on and raise the marginal cost curves for California businesses is false. The marginal cost curve represents the cost of producing an additional unit of a good or service. An increase in the sales tax rate impacts the final price paid by consumers, but it does not directly alter the costs associated with the production of goods, and therefore does not shift the marginal cost curves of businesses. Taxes such as a sales tax can, however, affect the overall costs for consumers and can change the demand for businesses' products. But as for the businesses' production costs, those are not impacted by a sales tax increase.
The tax incidence, or the division of the payment of a tax between buyers and sellers, depends on the relative elasticity of demand and supply. The more elastic the demand curve, the more likely that consumers will reduce quantity rather than paying higher prices, leading to a smaller tax revenue for the state. Similarly, the more elastic the supply, the more likely that sellers will reduce the quantity sold rather than accepting lower prices. In cases where both supply and demand are elastic, tax revenue will be low because the quantity transacted will decrease significantly.