Question

Suppose that the U.S. government decides to charge beer consumers a tax. Before the tax, 10 billion cases of beer were sold every year at a price of $7 per case. After the tax, 5 billion cases of beer are sold every year; consumers pay $9 per case (including the tax), and producers receive $6 per case.
a. The amount of the tax on a case of beer is ($_____) per case. Of this amount, the burden that falls on consumers is ($_____) per case, and the burden that falls on producers is ($_____) per case.
b. (True or False) The effect of the tax on the quantity sold would have been smaller if the tax had been levied on producers.

Answer 1

Answer:

$3

$2

$1

false

Explanation:

Tax is a compulsory sum levied by the government on goods  and services. it increases the price of the good

Tax on a case of beer = amount consumers pay after the tax has been levied - amount producers receive = $9 - $6 = $3

Burden on consumers = amount consumers pay after the tax has been levied on the cases of beer - amount consumers pay before tax was levied on cases of beer = $9 - $7 = $2

Burden on producers =  Tax on a case of beer - Burden on consumers = $3 - $2 = $1

false. producers are already being taxed