Producers will bear a larger burden of a sales tax if which statement is correct? a....

Producers will bear a larger burden of a sales tax if

which statement is correct?

a. demand is relatively elastic and supply is relatively inelastic.

b. demand is relatively inelastic and supply is relatively elastic.

c. both demand and supply are relatively inelastic.

d. both demand and supply are relatively elastic.

e. the tax is collected by firms rather than remitted directly to the government by consumers.

Solutions

Expert Solution

The incidence of an excise tax is the rate which measure of who really bears the burden of the tax.

Irrespective of on whom tax is imposed, tax burden will be shared by both sellers and buyers.

The burden of tax falls more on the inelastic side, so if demand is relatively inelastic, then burden of tax falls more on buyers while burden of tax will be less on the sellers and vice-versa.

Hence it can be said that Producers will bear a larger burden of a sales tax if demand is relatively elastic and supply is relatively inelastic.

Hence option a is the correct answer.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

The excess burden of a tax is larger the greater are

The excess burden of a tax is larger the greater are 1) ________________________________, 2) ______________________________________, and 3) _______________________________. Fill in the blanks and explain. (Using the formula for excess burden will help fill in the blanks.) (15 points)

Who will bear the burden of tax if the tax is collected from the supplies, if...

Who will bear the burden of tax if the tax is collected from the supplies, if A. Supply is perfectly elastic? B. Supply is perfectly inelastic? C. Demand is perfectly elastic? D. Demand is perfectly inelastic?

Tax burden

Let QD=80-P and QS=2P-100 describe the demand and supply function for a commodity. Suppose that government imposes a $3 tax per unit sold on producers. What is the tax burden (incidence) of consumers?

Which statement is correct with respect to marginal and average tax rates under a progressive tax...

Which statement is correct with respect to marginal and average tax rates under a progressive tax structure? Multiple Choice Generalizations cannot be made. The question can only be answered with reference to the tax situation of a specific taxpayer. At very low levels of taxable income, a taxpayer's marginal and average tax rates will be the same. At very high levels of taxable income, a taxpayer's marginal and average tax rates will be the same. For most taxpayers, the average...

10) Explain the following statement. The burden of a tax is borne by individuals in relationship...

10) Explain the following statement. The burden of a tax is borne by individuals in relationship to their ability to escape the tax. (Hint: use of equations and especially well explained diagrams will be helpful in answering the question.)

Which of the following statement is correct?

Which of the following statement is correct?DJIA is not value weightedNone of the aboveIf the Efficient Markets Hypothesis is NOT true, all stocks are correctly pricedCommon shares is not a financial assetCommon shares is not a financial assetWhich of the following statement is NOT correct?None of the abovePrice Impact is not a trading cost for investors when trading common stocksThere is a decrease in number of IPOs after 200012b-1 Fee is not a trading cost for investors when trading common...

which statement is true? a.customer do not pay sales tax b.A transaction entered in the sales...

which statement is true? a.customer do not pay sales tax b.A transaction entered in the sales receipt window will not be tracked through the accounts receivable or customer report. c.all customer sales arerecordedin the sales receipt window. d.all customer sales are recorded in the invoice window.

1. Which of the following statements is true? a. consumers bear a greater excise tax...

1. Which of the following statements is true? a. consumers bear a greater excise tax burden than producers when the demand for the good is inelastic b. consumers bear a greater excise tax burden than producers when the demand for the good is elastic c. consumers and producers bear equal excise tax burdens when the demand for the good is inelastic d. consumers and producers bear equal excise tax burdens when the demand for the good...

Which of the following statement(s) is correct?

Which of the following statement(s) is correct?Cash flows are conventional when there are no cash inflows prior to a cash outflow.In terms of shareholder wealth maximization in the context of mutually exclusive projects, the project with the higher IRR is not necessarily better than the project with the lower IRR.Financing matters for valuation, but is typically ignored in determining cash flows in capital budgeting.a. All three are falseb. Only 1. is correctc. All three are correctd. Only 2. is correcte....

Which statement about sponges is correct?

1.Which statement about sponges is correct?Sponges have two germ layers, which give rise to well-organized tissues.Sponges can only reproduce asexually by fragmentation or budding.Most sponges have bilateral symmetry.Sponges belong to the group of invertebrates known as cnidarians.Sponges are filter feeders.2. Which are invertebrate chordates?tunicates onlylancelets onlyjawless fishes onlytunicates and lancelets but not jawless fishestunicates, lancelets, and jawless fishes

Subjects