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 greater under the more elastic supply curve S0.
B)is greater under the less elastic supply curve S0.
C)is greater under the less elastic supply curve S1.
D)is the same under either supply curve because there is a single demand curve that captures buyers' market behavior.

Question

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 greater under the more elastic supply curve S0. 
B)is greater under the less elastic supply curve S0. 
C)is greater under the less elastic supply curve S1. 
D)is the same under either supply curve because there is a single demand curve that captures buyers' market behavior.

Quizplus · Accepted Answer

The producer's burden of the tax is greater under the less elastic supply curve S1 because producers are less able to pass the tax onto consumers when supply is inelastic, resulting in a larger share of the tax burden falling on them.

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