Refer to Scenario 19.2 below to answer the questions that follow.
SCENARIO 19.2: The current lowest cost method of producing brown paper bags is $5.00 per 100 bags. The government imposes a $0.50 tax per unit of labor. After the tax is imposed, paper bag producers will use two units of labor to produce 100 paper bags. This increases the cost of paper-bag production to $6.50 per 100 bags.
-Refer to Scenario 19.2. If 1,000 paper bags are sold, the total burden of the tax is

Question

Quizplus · Accepted Answer

The tax is $0.50 per unit of labor, and each 100 bags require 2 units of labor, so the tax per 100 bags is $1.00. Therefore, the tax for 1,000 bags is $10.00. The producers will have to bear this tax burden as an additional cost, which will increase the production cost from $5.00 to $6.50 per 100 bags. If 1,000 paper bags are sold, the total burden of the tax is $10.00, which is the answer option C.