If the government institutes a specific tax for a good,
A)the producer simply passes the entire tax on to the consumer.
B)the producer must absorb the entire tax.
C)the producer can generally only pass part of the tax onto the consumer.
D)the equilibrium price drops.

Question

Quizplus · Accepted Answer

The incidence of a tax (how much is absorbed by producers versus passed on to consumers) depends on the elasticities of supply and demand. Typically, both producers and consumers share the burden of the tax, meaning the producer can generally only pass part of the tax onto the consumer.

If the Government Institutes a Specific Tax for a Good