P=7l=7On the following diagram if there is a tax of $3 dollars imposed on sellers, what isthe tax burden on sellers?$7$1$2$3

Answered: P,=7 lo=7 On the following diagram if…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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P=7
l=7
On the following diagram if there is a tax of $3 dollars imposed on sellers, what is
the tax burden on sellers?
$7
$1
$2
$3

Expert Solution

Step 1

Answer:

If a tax of $3 is imposed on sellers then the supply curve will go up by 3 units at each quantity.

Graphical presentation:

According to the above figure, the supply curve has shifted up. The new equilibrium occurs at point E. The price received by sellers is $6 after tax. Therefore, the price received by sellers has decreased by 1. It means the tax burden on sellers is 1.

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