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30 July, 14:26

Suppose buyers of fountain drinks are required to send $0.50 to the government for every fountain drink they buy. Further, suppose this tax causes the effective price received by sellers of fountain drinks to fall by $0.20 per drink. Which of the following statements is correct? a. This tax causes the demand curve for fountain drinks to shift downward by $0.50 at each quantity.

b. The price paid by buyers is $0.30 per drink more than it was before the tax.

c. Forty percent of the burden of the tax falls on sellers.

d. All of the above are correct.

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  1. 30 July, 14:46
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    d. All of the above are correct.

    Explanation:

    a. This tax causes the demand curve for fountain drinks to shift downward by $0.50 at each quantity.

    b. The price paid by buyers is $0.30 per drink more than it was before the tax.

    This is true as the difference between $0.50 and $0.20 is $0.30. The price paid by buyers is indeed $0.30 per drink more than it was before the tax.

    c. Forty percent of the burden of the tax falls on the sellers.

    This is true as $0.20 of $0.50 is 40% and this tax burden falls on the sellers.
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