Suppose buyers of fountain drinks are required to send $0.50 to the government for every fountain drink they buy. Further, suppose this tax causes the effective price received by sellers of fountain drinks to fall by $0.20 per drink. Which of the following statements is correct? a. This tax causes the demand curve for fountain drinks to shift downward by $0.50 at each quantity.

b. The price paid by buyers is $0.30 per drink more than it was before the tax.

c. Forty percent of the burden of the tax falls on sellers.

d. All of the above are correct.

Question

Business

Leonel Escobar

18 January, 06:10

Suppose buyers of fountain drinks are required to send $0.50 to the government for every fountain drink they buy. Further, suppose this tax causes the effective price received by sellers of fountain drinks to fall by $0.20 per drink. Which of the following statements is correct? a. This tax causes the demand curve for fountain drinks to shift downward by $0.50 at each quantity.

b. The price paid by buyers is $0.30 per drink more than it was before the tax.

c. Forty percent of the burden of the tax falls on sellers.

d. All of the above are correct.

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Answers (1)

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Romeo · Answer 1

d. All of the above are correct.

Explanation:

a. This tax causes the demand curve for fountain drinks to shift downward by $0.50 at each quantity.

b. The price paid by buyers is $0.30 per drink more than it was before the tax.

This is true as the difference between $0.50 and $0.20 is $0.30. The price paid by buyers is indeed $0.30 per drink more than it was before the tax.

c. Forty percent of the burden of the tax falls on the sellers.

This is true as $0.20 of $0.50 is 40% and this tax burden falls on the sellers.