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 producer's burden of the tax
A)is Pₐ - Pd under either supply curve.
B)is Pb - Pₑ under either supply curve.
C)is Pₐ - Pd if the supply curve is S₀ and Pb - Pₑ if the supply curve is S₁.
D)is Pc - Pd if the supply curve is S₀ and Pc - 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 producer's burden of the tax
A)is Pₐ - Pd under either supply curve. 
B)is Pb - Pₑ under either supply curve. 
C)is Pₐ - Pd if the supply curve is S₀ and Pb - Pₑ if the supply curve is S₁. 
D)is Pc - Pd if the supply curve is S₀ and Pc - Pₑ if the supply curve is S₁.

Quizplus · Accepted Answer

The producer's burden of the tax is the difference between the price received by producers after the tax and the price they would have received without the tax. This is represented by Pc-Pd for the more inelastic supply curve S0 and Pc-Pe for the more elastic supply curve S1. Therefore, the correct answer is D.

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