Question

42.) True or False? An excise tax imposed on the sellers of a good has exactly the same effects as one of equal size imposed on the buyers. (1 point)

43.) True or False? An excise tax imposed on the sellers of the good will raise the price paid by buyers, reduce the price received by sellers, and reduce the quantity bought and sold. (1 point)

44.) True or False? An excise tax creates a tax wedge between the price buyers pay and the price sellers receive. (1 point)

45.) True or False? The incidence of an excise tax depends on the elasticities of demand and supply for the good. (1 point)

Answer 1

42) True

Explanation:

There is no practical differnece in imposing of tax on either of them i.e buyer and seller.

Example:

Tax Rate = 10 % and price of good is $100

When the tax is imposed on buyer, the buyer will have to pay $110 ( $100 +$10)

When the tax is imposed on selller, the seller will charge $110 ($100 +$10)

Either way the amount spent on good is $110

43) True

Explanation:

When the tax is imposed, the price of the good will increase that will decrease the quantity bought and sold as now the consumer has to pay more.

44) True

Explanation:

This is because the buyer will pay more than what the seller will recieve.

Example:

Tax Rate = 10% and Price of Good = $100

The buyer will pay $110 ($100 +$10) but the seller will recieve $100 and the additional $10 will be given as tax.

45) True

Explanation:

When supply is more elastic than demand, the tax burden is more on the buyers whereas when demand is more elastic than supply, the tax burden is more on the sellers.