Question

In: Economics

A tax on hamburgers Suppose a state government imposes a tax on sales of hamburgers. Before...

A tax on hamburgers

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.

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

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

Solutions

Expert Solution

Tax= difference between price paid by consumers and price received by sellers.

= 3.75-3= 0.75 per hamburger

Tax incidence on sellers= 3.25-3= 0.25

For per six pack

Tax incidence on sellers = 0.25*6= 1.5

Rahul Sunny answered 2 years ago
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