When a tax is imposed on the producers of a product, which of the following is incorrect?
A)The consumers and producers each bear some part of the burden.
B)If the demand curve is relatively inelastic, the burden borne by consumers increases.
C)If the supply curve is relatively elastic, the burden borne by consumers increases.
D)If the tax is levied on producers, the producers bear the burden of the tax; if the tax is levied on consumers, the consumers bear the burden of the tax.

Question

Quizplus · Accepted Answer

The statement in D is incorrect because regardless of whether a tax is levied on producers or consumers, the economic incidence (or burden) of the tax depends on the relative elasticities of supply and demand, not on who the tax is nominally levied upon.

When a Tax Is Imposed on the Producers of a Product