Suppose sellers of perfume are required to send $1.00 to the government for every bottle of perfume they sell.Further,suppose this tax causes the price paid by buyers of perfume to rise by $0.60 per bottle.Which of the following statements is correct?

Question

Quizplus · Accepted Answer

Option A is correct because the tax is $1.00 but the price paid by buyers only rises by $0.60, so sellers only receive $0.40 less per bottle than before the tax. 
Option B is incorrect because the burden of the tax falls on the buyers since they are the ones who end up paying more for the perfume. 
Option C is also incorrect because the demand curve would not shift downward by $1.00 at each quantity of perfume; rather, the supply curve would shift upward by $1.00, resulting in a new equilibrium price and quantity for the perfume.

Suppose Sellers of Perfume Are Required to Send $1