Calculating tax incidence Suppose that the U. government decides to charge cola consumers a tax. Before the tax, 10,000 cases of cola were sold...

5. Calculating tax incidence

Suppose that the U.S. government decides to charge cola consumers a tax. Before the tax, 10,000 cases of cola were sold every week at a price of $4 per case. After the tax, 5,000 cases of cola are sold every week; consumers pay $6 per case (including the tax), and producers receive $3 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.

Points:

Close Explanation

Explanation:

True or False: The effect of the tax on the quantity sold would have been larger if the tax had been levied on producers.

True

False