Figure 18-2

Figure 18-2 shows a demand curve and two sets of supply curves, one set more elastic than the other.
-Refer to Figure 18-2.If the government imposes an excise tax of $1.00 on every unit sold, the producer's burden of the tax
A)is greater under the more elastic supply curve S₀.
B)is greater under the less elastic supply curve S₀.
C)is greater under the less elastic supply curve S₁.
D)is the same under either supply curve because there is a single demand curve that captures buyers' market behavior.

Question

Figure 18-2
  
Figure 18-2 shows a demand curve and two sets of supply curves, one set more elastic than the other.
-Refer to Figure 18-2.If the government imposes an excise tax of $1.00 on every unit sold, the producer's burden of the tax
A)is greater under the more elastic supply curve S₀. 
B)is greater under the less elastic supply curve S₀. 
C)is greater under the less elastic supply curve S₁. 
D)is the same under either supply curve because there is a single demand curve that captures buyers' market behavior.

Quizplus · Accepted Answer

When the supply curve is less elastic (S₁), the producer's burden of the tax is greater. This is because in the less elastic supply curve there is less flexibility to adjust the quantity supplied in response to the change in price due to the tax, leading to a greater burden being placed on the producer rather than the consumer.

Figure 18-2 Figure 18-2 Shows a Demand Curve and Two Sets of Curve