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Question
Microeconomics
Posted 7 months ago

This graph shows a market where a tax has been imposed on the buyers of a good.
A market with a tax on buyers of a good

What letters represent the tax burden of sellers?

Choose 1 answer:
(A) None, since the buyers of a good were taxed
(B) CC
(C) BB
(D) DD
(E) EE

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Answer from Sia
Posted 7 months ago
Solution
a
Tax Incidence: When a tax is imposed on buyers, the demand curve shifts downward by the amount of the tax. This results in a new equilibrium where both buyers and sellers share the tax burden
b
Identifying Tax Burden: The tax burden on sellers is represented by the area between the original supply curve (S1) and the new equilibrium price after the tax is imposed. In this graph, this area is labeled as CC
Answer
(B) CC
Key Concept
Tax Incidence
Explanation
When a tax is imposed on buyers, the demand curve shifts downward, and the tax burden is shared between buyers and sellers. The area representing the tax burden on sellers is labeled CC in the graph.

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