If a $10 Sales Tax Is Imposed on a Good

question 159

Multiple Choice

If a $10 sales tax is imposed on a good and the equilibrium price increases by $10,the tax is

• A) split between buyers and sellers but not evenly.
• B) paid fully by sellers.
• C) paid fully by buyers.
• D) split evenly between buyers and sellers.
• E) perhaps split between buyers and sellers but it is impossible to determine the incidence without further information.

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Definitions:

Compound Interest

Interest calculated on both the initial principal and the accumulated interest from previous periods, leading to exponential growth over time.

Compounded Daily

Refers to the process of calculating interest on an initial principal, which includes both the accumulated interest from previous periods and the principal itself, on a daily basis.

Interest Rate

A percentage that represents the cost of borrowing money or the profit from saving money, adjusted annually.

Compounded Quarterly

Describes the process of adding interest to the principal sum of a deposit or loan, with this addition of interest occurring four times a year.