Author Question: Can the incidence of a sales tax ever be so that buyers pay all of the tax or so that sellers pay ... (Read 81 times)

segrsyd · **on:** Jun 29, 2018

Can the incidence of a sales tax ever be so that buyers pay all of the tax or so that sellers pay all of the tax?

What will be an ideal response?

Question 2

The above figure shows a firm in monopolistic competition. At the profit maximizing level of output, excess capacity for the firm is equal to

A) 0 units per day.
B) 4 units per day.
C) 8 units per day.
D) 16 units per day.

cuttiesgirl16 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

Yes, each is possible. If demand is perfectly price inelastic, for example in the case of an extreme necessity, the tax will be paid entirely by the buyer. If supply is perfectly inelastic, for example in the case of the momentary supply curve, the tax will be paid entirely by the seller.

Answer to Question 2

C