If the federal government placed a 50 cent per pack excise tax on cigarette manufacturers, and if as a result, the price to consumers of a pack of cigarettes went up by 40 cents, the
A) actual burden of this tax falls mostly on consumers.
B) actual burden of this tax falls mostly on manufacturers.
C) actual burden of the tax would be shared equally by producers and consumers.
D) tax would clearly be a progressive tax.

Question

Quizplus · Accepted Answer

The price increase of 40 cents to consumers, compared to the 50 cent tax, indicates that consumers bear most of the tax burden, as they are paying most of the tax through higher prices.

If the Federal Government Placed a 50 Cent Per Pack