If the government decides to levy (place) a $3 per unit tax on consumers of a good, it would have the same effect as:
A) a $3 per unit tax levied on producers of the good
B) a $3 per unit subsidy paid to producers of the good.
C) a price floor that raises the good’s price by $3 per unit.
D) a price ceiling that raises the good’s price by $3 per unit.
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Concept Clarifier: Tax
The demand and supply for an unhealthy energy drink are given in the following diagram. Prices are in dollars and quantities are in hundreds of units. The government imposes a $1 tax on the purchase of a unit of this energy drink, paid for by the consumers at the time of the transaction.
Buyers pay ________ tax on each energy drink
Sellers pay ________ tax on each energy drink
Practice: Tax Burden