1.Suppose a federal tax, to be paid by sellers, is placed on cars. Further suppose the...

1.Suppose a federal tax, to be paid by sellers, is placed on cars. Further suppose the market for cars is characterized by a downward sloping demand curve and an upward sloping supply curve. After the tax is imposed the quantity of cars exchanged will _______, and the net price received by sellers, i.e. the price they receive after they pay the tax, will _______. A) increase; increase B). increase; decrease C). decrease; increase D) decrease; decrease. Please explain.

Expert Solution

After a tax is imposed the price of the cars will increase and that will reduce the goods exchanged. and the net price received by the seller will decrease. The supplier will receive a less amount in the market because the gap between the price paid by the consumer and amount received by the seller will be the tax,

the answer is "D".

Rahul Sunny answered 2 years ago

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