There Have Been Proposals That a Tax Be Imposed on Sugar-Laden

question 41

Multiple Choice

There have been proposals that a tax be imposed on sugar-laden soft drinks in an attempt to reduce their consumption.Assume for simplicity that all bottled soft drinks are the same size.Suppose the initial market equilibrium is P = $2.00 and Q = 1000. FIGURE 4-4
-Refer to Figure 4-4.Suppose the government imposes a tax of $0.60 per soft drink purchased.Which of the following statements most accurately describes the economic incidence of this tax?

• A)The consumer bears more of the burden because demand is elastic relative to supply.
• B)The seller bears more of the burden because supply is inelastic relative to demand.
• C)The consumer bears more of the burden because demand is inelastic relative to supply.
• D)The seller bears more of the burden because supply is elastic relative to demand.
• E)The burden is shared equally between consumer and seller because the slopes of the supply and demand curves are the same.

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