Figure 6-14.

-Refer to Figure 6-14.The per-unit burden of the tax on buyers is

Question

Figure 6-14.
 
-Refer to Figure 6-14.The per-unit burden of the tax on buyers is

Quizplus · Accepted Answer

To find the per-unit burden of the tax on buyers, we need to compare the new equilibrium price (including the tax) with the old equilibrium price (without the tax). The old equilibrium price was $40. The new equilibrium price is the point where the demand curve intersects the supply curve plus the amount of the tax. We can see that this is where the price is $44. At this new equilibrium price, the quantity demanded is 100 - (44-40) = 96. Thus, the quantity sold is 96 units.

The tax is $4, and it is being collected from the buyers. Therefore, the per-unit burden of the tax on buyers is $4/96 = $0.042 per unit.

To find the per-unit burden of the tax on sellers, we can use the same method. The new equilibrium price is still $44, and the new equilibrium quantity is 96 units. The old equilibrium quantity was 100 units. Therefore, the per-unit burden of the tax on sellers is $4/100 = $0.04 per unit.

Since the tax burden on buyers is higher, the answer is C) $8.

Figure 6-14. -Refer to Figure 6-14.The Per-Unit Burden of the Tax on of the Tax