As shown in Exhibit 3-10, assume the government places a $1 per pack sales tax on cigarettes. The percentage of the burden of taxation paid by tobacco sellers is:

Question

As shown in Exhibit 3-10, assume the government places a $1 per pack sales tax on cigarettes. The percentage of the burden of taxation paid by tobacco sellers is: ​

Quizplus · Accepted Answer

The burden of taxation is divided between the consumer and the seller. In this case, the sales tax is directly added to the price of the product, which increases the cost for consumers. Therefore, the burden of taxation is partially shifted to the consumer, and the seller bears a portion of the tax burden as well. However, since cigarettes are an addictive product, consumers may be less price-sensitive, which means the burden of taxation may be shifted more toward the seller than in other markets. Therefore, the answer is B) 50 percent, as the burden of taxation is divided between the seller and the consumer.

As Shown in Exhibit 3-10, Assume the Government Places a $1