Which of the following statements is correct regarding the imposition of a tax on gasoline?
A)The incidence of the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government.
B)The incidence of the tax depends upon the price elasticities of demand and supply.
C)The amount of tax revenue raised by the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government.
D)The amount of tax revenue raised by the tax does not depend upon the amount of the tax per unit.

Question

Quizplus · Accepted Answer

The incidence of the tax on gasoline depends on the price elasticities of demand and supply. If the demand for gasoline is price inelastic, the burden of the tax will be mostly on buyers. If the supply of gasoline is price inelastic, the burden will be mostly on sellers. The amount of tax revenue raised by the tax depends on the amount of the tax per unit multiplied by the quantity of gasoline sold. Therefore, choice C is incorrect. Choice A is incorrect because who remits tax payments does not affect the incidence of the tax. Choice D is incorrect because the amount of tax revenue raised by the tax depends on both the tax rate and the quantity of gasoline sold.

Which of the Following Statements Is Correct Regarding the Imposition