Suppose the figure to the right represents the market for cotton. To help reduce debt, the government decides to levy a tax on cotton of $0.30 per pound to be paid by cotton farmers. What is the incidence of this tax? Producers pay $ consumers pay $ rounded to two decimal places.) of the $0.30 tax and (Enter your responses C Price (dollars per pound) 2.40- 2.20- 2.00- 1.80- 1.60- 1.40 1.20- 1.00- 0.80- 0.60- 0.40- 0.20- 0.00+ FO 0 200 Supply 400 800 600 Quantity (pounds in 1000s) Demand 1000 1200 ✪ 0 C

Suppose the figure to the right represents the market for cotton. To help reduce debt, the government decides to levy a tax on cotton of $0.30 per pound to be paid by cotton farmers. What is the incidence of this tax? Producers pay $ consumers pay $ rounded to two decimal places.) of the $0.30 tax and (Enter your responses C Price (dollars per pound) 2.40- 2.20- 2.00- 1.80- 1.60- 1.40 1.20- 1.00- 0.80- 0.60- 0.40- 0.20- 0.00+ FO 0 200 Supply 400 800 600 Quantity (pounds in 1000s) Demand 1000 1200 ✪ 0 C

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: The Design Of The Tax System

Section: Chapter Questions

Problem 5PA

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5. Calculating tax incidence Suppose that the U.S. government decides to charge cola consumers a tax. Before the tax, 40 billion cases of cola were sold every year at a price of $7 per case. After the tax, 34 billion cases of cola are sold every year; consumers pay $8 per case (induding the tax), and producers receive $4 per case. per case, and the The amount of the tax on a case of cola isS per case. Of this amount, the burden that falls on consumers is S burden that falls on producers is s per case. True or False: The effect of the tax on the quantity sold would have been larger if the tax had been levied on producers. O True O False
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