Microeconomics - Taxes - Microeconomics: Taxes 11/26/2007...

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Microeconomics: Taxes 26/11/2007 14:39:00 (Chapter 7) When taxes are levied against sellers, some of the tax burden is passed on to buyers as  well. When supply is perfectly elastic, taxing sellers “because they can afford the  tax more easily than buyers” makes no economic sense at all. o The burden of a tax falls where it can, not  where it is placed.  (Chapter 8)  We will not cover pages 232 through 237 In class Problem 1 The more elastic supply is, the larger the burden of the tax is borne by  consumers. Completely elastic supply, the burden of the tax is borne completely by  buyers. Perfectly inelastic supply, the burden of the tax is borne completely by sellers.  Competition tends to drive economic profit down to zero. It is important to recognize the difference between an accounting profit (which  could still be positive) and an economic profit, which includes opportunity, 
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This note was uploaded on 03/20/2008 for the course ECON 2306 taught by Professor Cloud during the Fall '07 term at University of Georgia Athens.

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Microeconomics - Taxes - Microeconomics: Taxes 11/26/2007...

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