Figure 17-2 shows a demand curve and two sets of supply curves, one set more elastic than the other.
-Refer to Figure 17-2. If the government imposes an excise tax of $1.00 on every unit sold, the consumer's burden of the tax
A) is greater under the more elastic supply curve S0.
B) is greater under the less elastic supply curve S0.
C) is greater under the less elastic supply curve S1.
D) is the same under either supply curve because there is a single demand curve that captures buyers' market behavior.

Question

Figure 17-2 shows a demand curve and two sets of supply curves, one set more elastic than the other.
-Refer to Figure 17-2. If the government imposes an excise tax of $1.00 on every unit sold, the consumer's burden of the tax
A) is greater under the more elastic supply curve S0. 
B) is greater under the less elastic supply curve S0. 
C) is greater under the less elastic supply curve S1. 
D) is the same under either supply curve because there is a single demand curve that captures buyers' market behavior.

Quizplus · Accepted Answer

The consumer's burden of the tax is greater under the more elastic supply curve S0 because the supply curve will shift to the left by a smaller amount, resulting in a smaller decrease in quantity supplied and a smaller increase in price.

Figure 17-2 Shows a Demand Curve and Two Sets of Supply