macro question 6 ### 6. Calculating Tax IncidenceSuppose that the U.S. government decides to charge cola consumers a tax. Before the tax, 10 million cases of cola were sold every month at a price of $4 per case. After the tax, 4 million cases of cola are sold every month; consumers pay $7 per case (including the tax), and producers receive $1 per case.**The amount of the tax on a case of cola is $ [blank] per case.** **Of this amount, the burden that falls on consumers is $ [blank] per case, and the burden that falls on producers is $ [blank] per case.**True or False: The effect of the tax on the quantity sold would have been larger if the tax had been levied on producers.- ☐ True- ☐ False### ExplanationIn this section, you are required to calculate the tax incidence—that is, how the burden of a tax is distributed between consumers and producers. The initial and post-tax sales prices provide information necessary to determine the tax burden. Additionally, considering the impact on the quantity sold allows analysis of the economic effects relative to the target group for the tax.### Instructions for Solving:1. **Amount of the Tax:** Calculate the difference between the consumer price post-tax and the producer price post-tax. 2. **Burden on Consumers:** Determine the increase in the price consumers pay due to the tax. 3. **Burden on Producers:** Calculate the reduction in the amount producers receive after the tax is applied.4. **Evaluate the True/False Statement:** Consider whether taxing producers directly affects the quantity sold more significantly than taxing consumers by examining the shift in supply and demand curves.This activity aids in understanding the principles of tax incidence and the influence of taxes on market outcomes. The objective is not only to find numerical answers but to grasp the economic concepts behind the redistribution of tax burdens between different market participants.

Suppose that the U.S. government decides to charge cola consumers a tax. Before the tax, 10 million cases of cola were sold every month at a price of $4 per case. After the tax, 4 million cases of cola are sold every month; consumers pay $7 per case (including the tax), and producers receive $1 per case. The amount of the tax on a case of cola is s per case. Of this amount, the burden that falls on consumers is $ per case, and the burden that falls on producers is $ per case. True or False: The effect of the tax on the quantity sold would have been larger if the tax had been levied on producers.

Suppose that the U.S. government decides to charge cola consumers a tax. Before the tax, 10 million cases of cola were sold every month at a price of $4 per case. After the tax, 4 million cases of cola are sold every month; consumers pay $7 per case (including the tax), and producers receive $1 per case. The amount of the tax on a case of cola is s per case. Of this amount, the burden that falls on consumers is $ per case, and the burden that falls on producers is $ per case. True or False: The effect of the tax on the quantity sold would have been larger if the tax had been levied on producers.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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