Refer to the Figure 5.7. An excise tax introduces a wedge between the price paid by consumers (Pc) and the price received by producers (Pp). Which of the following statement is correct? O When the supply is more elastic than demand, the tax incidence on consumers, Pc - Pe, is lower than the tax incidence on producers, Pe - Pp. When the supply is more inelastic than demand, the tax incidence on consumers, Pc- Pe, is larger than the tax incidence on producers, Pe - Pp. O When the supply is more elastic than demand, the tax incidence on consumers, Pc - Pe, is larger than the tax incidence on producers, Pe - Pp. O When the demand is more elastic than supply, the tax incidence on consumers, Pc - Pe, is larger than the tax incidence on producers, Pe - Pp

Refer to the Figure 5.7. An excise tax introduces a wedge between the price paid by consumers (Pc) and the price received by producers (Pp). Which of the following statement is correct? O When the supply is more elastic than demand, the tax incidence on consumers, Pc - Pe, is lower than the tax incidence on producers, Pe - Pp. When the supply is more inelastic than demand, the tax incidence on consumers, Pc- Pe, is larger than the tax incidence on producers, Pe - Pp. O When the supply is more elastic than demand, the tax incidence on consumers, Pc - Pe, is larger than the tax incidence on producers, Pe - Pp. O When the demand is more elastic than supply, the tax incidence on consumers, Pc - Pe, is larger than the tax incidence on producers, Pe - Pp

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Taxes and Subsidies: End of Chapter Problem Let's see if we can formulate any real laws about the economics of taxation. Which of the following must be true? More than one may be true. If there is a tax: Must occur a. The equilibrium quantity must fall, and the price that buyers pay must rise. b. The equilibrium quantity must rise, and the price that sellers pay must rise. Will not occur c. The equilibrium quantity must fall, and the price that sellers receive must fall. Answer Bank d. The equilibrium quantity must rise, and the price that buyers receive must fall.
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