Suppose a tax is imposed on the sellers of fast-food French fries.The burden of the tax will
A)fall entirely on the buyers of fast-food French fries.
B)fall entirely on the sellers of fast-food French fries.
C)be shared equally by the buyers and sellers of fast-food French fries.
D)be shared by the buyers and sellers of fast-food French fries but not necessarily equally.

Question

Quizplus · Accepted Answer

The burden of the tax will be shared by the buyers and sellers of fast-food French fries but not necessarily equally. Since the tax raises the cost of production for the sellers, they may pass on some of the tax to the buyers through higher prices. However, if demand for French fries is highly elastic, the sellers may not be able to pass on the entire tax to the buyers and may absorb some of the cost themselves. Therefore, the burden of the tax is shared by both parties in varying proportions depending on the elasticity of demand and supply.

Suppose a Tax Is Imposed on the Sellers of Fast-Food