Question

In the widget market, it is known that producers are relatively responsive to price changes, as compared to consumers.The government places a $5 per unit tax on sales of widgets. Which of the following is the most likely result?A. Consumers and producers will split the tax evenly.B. Most of the tax will be paid by producers.C. Most of the tax will be paid by consumers.D. Who pays the tax will be determined by the government.

Answer 1

Answer:

C. Most of the tax will be paid by consumers.

Explanation:

Whenever the taxes are imposed in the form of extra charge added to the  cost of producing any product, then that tax is added to the cost of such product.

Accordingly the producers, do not pay such amount from their pockets, as they recover such amount from the consumers ultimately then adding them to the cost.

Accordingly the consumers are the ultimate people who bear such increase or addition of taxes to the products.