Figure 18-2

Figure 18-2 shows a demand curve and two sets of supply curves, one set more elastic than the other.
-Refer to Figure 18-2.If the government imposes an excise tax of $1.00 on every unit sold, the consumer's burden of the tax
A)is Pₐ - Pc under either supply curve.
B)is Pb - Pc under either supply curve.
C)is Pₐ - Pc if the supply curve is S₀ and Pb - Pc if the supply curve is S₁.
D)is Pₐ - Pd if the supply curve is S₀ and Pb - Pₑ if the supply curve is S₁.

Question

Figure 18-2
  
Figure 18-2 shows a demand curve and two sets of supply curves, one set more elastic than the other.
-Refer to Figure 18-2.If the government imposes an excise tax of $1.00 on every unit sold, the consumer's burden of the tax
A)is Pₐ - Pc under either supply curve. 
B)is Pb - Pc under either supply curve. 
C)is Pₐ - Pc if the supply curve is S₀ and Pb - Pc if the supply curve is S₁. 
D)is Pₐ - Pd if the supply curve is S₀ and Pb - Pₑ if the supply curve is S₁.

Quizplus · Accepted Answer

If the supply curve is S₀, the price paid by consumers after the tax is Pₐ, while the price received by sellers after the tax is Pc. Therefore, the consumer's burden of the tax is Pₐ - Pc. 
If the supply curve is S₁, the new equilibrium price after the tax is Pb. Consumers pay Pb, while sellers receive Pₑ. Therefore, the consumer's burden of the tax is Pb - Pc.

Figure 18-2 Figure 18-2 Shows a Demand Curve and Two Sets of Curve