« previous next »

Author Question: How is the incidence of a sales tax between the buyer and the seller determined? What will be an ... (Read 39 times)

rayancarla1

  • Hero Member
  • *****
  • Posts: 571
on: Jun 29, 2018
How is the incidence of a sales tax between the buyer and the seller determined?
 
  What will be an ideal response?

Question 2

Andrew has the utility of wealth curve shown in the above figure. He owns an SUV worth 30,000 and that is his only wealth. There is a 10 percent chance that he will have an accident within a year. If he does have an accident, his SUV is worthless.
 
  Suppose all SUV owners are like Andrew. An insurance company agrees to pay each person who has an accident the full value of his/her SUV. The company's operating expenses are 1,500. What is the minimum insurance premium that the company is willing to accept? A) 1,500 per year
  B) 4,500 per year
  C) 3,000 per year
  D) 6,000 per year


kbennett34

  • Sr. Member
  • ****
  • Posts: 333
Reply #1 on: Jun 29, 2018
Answer to Question 1

The tax incidence depends on the price elasticities of supply and demand. Buyers pay more of the tax the more inelastic the demand and the more elastic the supply. Sellers pay more of the tax the more elastic the demand and the more inelastic the supply.

Answer to Question 2

B


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
« previous next »
 

Did you know?

Limit intake of red meat and dairy products made with whole milk. Choose skim milk, low-fat or fat-free dairy products. Limit fried food. Use healthy oils when cooking.

Did you know?

According to the FDA, adverse drug events harmed or killed approximately 1,200,000 people in the United States in the year 2015.

Did you know?

Before a vaccine is licensed in the USA, the Food and Drug Administration (FDA) reviews it for safety and effectiveness. The CDC then reviews all studies again, as well as the American Academy of Pediatrics and the American Academy of Family Physicians. Every lot of vaccine is tested before administration to the public, and the FDA regularly inspects vaccine manufacturers' facilities.

Did you know?

Barbituric acid, the base material of barbiturates, was first synthesized in 1863 by Adolph von Bayer. His company later went on to synthesize aspirin for the first time, and Bayer aspirin is still a popular brand today.

Did you know?

There are 60,000 miles of blood vessels in every adult human.

The heat range of a spark plug is determined by the distance the heat has to flow from the tip to ... The heat range of a spark plug is determined by the distance the heat has to flow from the tip to ...
Genetically determined innate immunity due to the species specificity of some infections, due to ... Genetically determined innate immunity due to the species specificity of some infections, due to ...
Binding site variation for transcription factor CEBPA along gene PCK1 as determined by ChIP Binding site variation for transcription factor CEBPA along gene PCK1 as determined by ChIP
The incidence of overweight and obesity among adults and children The incidence of overweight and obesity among adults and children
Determined the magnitude of the magnetic force on the conductor. Determined the magnitude of the magnetic force on the conductor.
Incidence of the Ten Most Common Cancers Incidence of the Ten Most Common Cancers
Video: Mechanisms of capillary exchange

For a complete list of videos, visit our video library