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.

---

Definitions:

Motor Vehicle Safety Act

Legislation aimed at ensuring the safety of vehicles and road users by setting standards and regulations for vehicle manufacturers and users.

Drawer of Cheque

The person who writes or issues a cheque, instructing a bank to pay a specific amount of money from the drawer’s account to the party named on the cheque.

Breach of Contract

An occurrence when one party does not honor a commitment or fails to perform any term of a contract without a legitimate legal excuse.

Undue Influence

Pressure from a dominant, trusted person that makes it impossible for a party to bargain the terms of a contract freely.