Figure 5.9 -Refer to Figure 5.9.Suppose the Market Is Initially in Equilibrium

question 20

Multiple Choice

Figure 5.9
-Refer to Figure 5.9.Suppose the market is initially in equilibrium at price P₁, and then the government imposes a tax on every unit sold.Which of the following statements best describes the impact of the tax?

• A)The consumer will bear a smaller share of the tax burden if the demand curve is D₁.
• B)The consumer's share of the tax burden is the same whether the demand curve is D₁ or D₂.
• C)The consumer will bear a smaller share of the tax burden if the demand curve is D₂.
• D)The consumer will bear the entire burden of the tax if the demand curve is D₂, and the producer will bear the entire burden of the tax if the demand curve is D₁.

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