Question

Which of the following is not correct? a. The wedge between the buyers’ price and the sellers’ price is the same, regardless of whether the tax is levied on buyers or sellers. b. In the new after-tax equilibrium, buyers and sellers share the burden of the tax. c. A tax places a wedge between the price that buyers pay and the price that sellers receive. d. Taxes levied on sellers and taxes levied on buyers are not equivalent.

Answer 1

Answer: D. Taxes levied on sellers and taxes levied on buyers are not equivalent.

Step-by-step explanation:

When a tax is being imposed on a seller or tax in being imposed on a buy, it makes no difference. Why it has no difference is that, whether is been imposed on the seller or the buyer, the buyer will be the one to pay the tax, since in any case, if the tax is collected from the seller, he can include it the price being sold to the buyer, or it can be directly collected from the buyer by the tax collector. That's why in anyway, it does matter which person the tax is being imposed on, since the buy will be the one to pay.