Question

Suppose that the U.S. government decides to charge cola consumers a tax. Before the tax, 25,000 cases of cola were sold every week at a price of $5 per case. After the tax, 20,000 cases of cola are sold every week; consumers pay $7 per case (including the tax), and producers receive $4 per case. The amount of the tax on a case of cola is $______per case. Of this amount, the burden that falls on consumers is $_______per case, and the burden that falls on producers is $_______per case.

The effect of the tax on the quantity sold would have been larger if the tax had been levied on consumers.
A. True
B. False

Answer 1

$3

$2

$1

True

Step-by-step explanation:

A tax is a compulsory amount levied by the government on the certain goods and services.

The amount of tax = price of a case after the introduction of tax - amount received by sellers

$7 - $4 = $3

The amount of tax paid by consumers = price after tax - price before tax

$7 - $5 = $2

Amount of tax paid by sellers = $3 - $2 = $1

I hope my answer helps you