Asked by deegii boogii on Apr 24, 2024
Verified
If a quantity tax is collected from competitive suppliers of a good, placing a tax on the good causes the price paid by consumers to increase more than if the tax had been collected directly from the buyers.
Quantity Tax
A tax that is levied on a per unit basis, meaning a specified amount is charged for each unit of a good or service sold.
Competitive Suppliers
Entities that compete in a market to offer goods or services, often leading to lower prices and higher quality.
Price Paid
The actual amount of money exchanged for a good or service at the point of sale.
- Explore how the financial burden of taxes is shared between consumers and producers in differing market setups.
Verified Answer
SA
Samer AlanbakiMay 02, 2024
Final Answer :
False
Explanation :
When a quantity tax is imposed on suppliers in a competitive market, the tax burden is shared between suppliers and consumers depending on the elasticities of supply and demand. The price paid by consumers does not necessarily increase more than if the tax were collected from buyers; the distribution of the tax burden depends on the relative elasticities of supply and demand, not on who the tax is collected from.
Learning Objectives
- Explore how the financial burden of taxes is shared between consumers and producers in differing market setups.
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