Suppose buyers of fountain drinks are required to send $0.50 to the government for every fountain drink they buy.Further,suppose this tax causes the effective price received by sellers of fountain drinks to fall by $0.20 per drink.Which of the following statements is correct?

Question

Quizplus · Accepted Answer

The tax causes the demand curve to shift downward by $0.50 at each quantity, as buyers are now paying $0.50 more for each drink. The price paid by buyers is $0.30 per drink more than it was before the tax, as the tax causes the effective price received by sellers to fall by $0.20 per drink. Forty percent of the burden of the tax falls on sellers, as they are receiving $0.20 less per drink than they were before the tax.

Suppose Buyers of Fountain Drinks Are Required to Send $0