Which of the following statements is true? A. The equilibrium price after a specific tax will be the same whether the tax is collected from consumers or producers. B. The equilibrium price after a specific tax will depend on whether the tax is collected from consumers or producers. C. The tax incidence on consumers will be higher if the tax is collected from consumers. D. The tax incidence on producers will be higher if the tax is collected from producers.

Question

Business

Kassandra Chaney

25 October, 02:03

Which of the following statements is true? A. The equilibrium price after a specific tax will be the same whether the tax is collected from consumers or producers. B. The equilibrium price after a specific tax will depend on whether the tax is collected from consumers or producers. C. The tax incidence on consumers will be higher if the tax is collected from consumers. D. The tax incidence on producers will be higher if the tax is collected from producers.

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Answers (1)

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Camille Bowman · Answer 1

The correct answer is A. The equilibrium price after a specific tax will be the same whether the tax is collected from consumers or producers.

Explanation:

Without tax the equilibrium price will be placed in Pe and the equilibrium amount will be Qe.

Once a tax has been applied, the price paid by consumers will be Pc and the price received by producers Pp. The price of consumers will be equal to the price of the producers plus the cost of the tax. Since consumers will buy less at the Pc price and producers will sell less in Pp, the quantity sold goes from Qe to Qt.