Exhibit 19-6 -Refer to Exhibit 19-6. Let S₁ be the supply curve of a producer. If S₂ is the supply curve of the same producer after the government imposes a per-unit tax, the share of the tax paid by the producer as compared to the share of the tax paid by consumers will be A)greater if D₁ is the demand curve facing the producer. B)greater if D₂ is the demand curve facing the producer. C)the same regardless of which demand curve the firm faces. D)Any of the above, depending on the type of good the tax is imposed on.

Question

Quizplus · Accepted Answer

The share of the tax paid by the producer is greater when the demand curve is more elastic (D₂), as consumers are more sensitive to price changes and the producer cannot pass on as much of the tax to consumers.

Exhibit 19-6 ​

Exhibit 19-6