The government can choose between taxing buyers of grapes at $1.00 per pound or taxing the sellers of grapes at $1.00 per pound. Which of the following statements is TRUE?
I. The choice most beneficial to buyers is placing the $1.00 tax on sellers.
II. The choice most beneficial to sellers is placing the $1.00 tax on buyers.
III. Either choice will have the same effect on both buyers and sellers.
A) I and II only
B) III only
C) I only
D) II only

Question

Quizplus · Accepted Answer

The economic incidence of a tax does not depend on whether it is levied on buyers or sellers. The burden of the tax will be shared between buyers and sellers depending on the price elasticity of demand and supply, so either choice will have the same effect on both parties.

The Government Can Choose Between Taxing Buyers of Grapes at $1.00