Question

In: Economics

Suppose a state government imposes a tax on sales of hamburgers. Before the tax, 16 million...

Suppose a state government imposes a tax on sales of hamburgers. Before the tax, 16 million hamburgers were sold at $3.25 per hamburger. With the tax in effect, 14 million hamburgers are sold, buyers pay $3.75 per hamburger, and sellers receive $3.00 per hamburger

a) In the scenario above, what is the tax ($ per hamburger)?

b) In the scenario above, what is the tax incidence that falls on the sellers of hamburgers? ($ per six pack)?

Solutions

Expert Solution

a) Tax = buyers pay - sellers receive = 3.75-3 = 0.75 per hamburger

b) Tax incidence on the sellers = Equilibrium price before tax - sellers receive = 3.25-3 = 0.25

Rahul Sunny answered 2 years ago
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