Suppose sellers of liquor are required to send $1.00 to the government for every bottle of liquor they sell.Further,suppose this tax causes the price paid by buyers of liquor to rise by $0.80 per bottle.Which of the following statements is correct?

Question

Quizplus · Accepted Answer

A) This statement is correct because the tax of $1.00 per bottle is a cost to the sellers, which will lead to an increase in the supply curve by the same amount at every quantity of liquor.
B) This statement is correct as sellers will have to bear the cost of the tax, which will leave them with a reduced effective price of $0.20 per bottle.
C) This statement is also correct because buyers now have to pay $0.80 more per bottle due to the tax, which amounts to 80% of the total tax.

Suppose Sellers of Liquor Are Required to Send $1