Price (dollars per bucket)161514131210200 300400500600700800Quantity (buckets)The above figure shows the market for buckets of golf balls at the driving range. Anew leisure time tax is placed on suppliers in this market, shifting the supply curvefrom So to S1. The tax incidence isA) such that buyers pay $1 per bucket and sellers pay $2 per bucket.B) split equally between buyers and sellers, each paying $1 per bucket.C) such that buyers pay $2 per bucket and sellers pay $1 per bucket.O D) split equally between buyers and sellers, each paying $2 per bucket.%3D

Answered: Price (dollars per bucket) 16 15 14 13…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Question

100%

Price (dollars per bucket)
16
15
14
13
12
10
200 300
400
500
600
700
800
Quantity (buckets)
The above figure shows the market for buckets of golf balls at the driving range. A
new leisure time tax is placed on suppliers in this market, shifting the supply curve
from So to S1. The tax incidence is
A) such that buyers pay $1 per bucket and sellers pay $2 per bucket.
B) split equally between buyers and sellers, each paying $1 per bucket.
C) such that buyers pay $2 per bucket and sellers pay $1 per bucket.
O D) split equally between buyers and sellers, each paying $2 per bucket.
%3D

Expert Solution

Step 1

Answer:

According to the above figure, due to tax the supply curve shifts to the left from S0 to S1. The new equilibrium price is $14. $14 is the price paid after tax by the buyers. The corresponding price on the old supply curve i.e. $11 is the price received by sellers after tax.

Incidence of tax on buyers = Price paid after-tax - Equilibrium price

Incidence of tax on buyers = 14 -12 = $2

The price paid by buyers has increased by $2.

And,

Incidence of tax on sellers = Equilibrium price - Price received by sellers

Incidence of tax on sellers = 12 - 11 = $1

The price received by sellers has decreased by $1.

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions