1 Which of the following is true about the tax incidence and

1.) Which of the following is true about the tax incidence and tax burden of an increase in tax?

The tax incidence of a tax is always equivalent to its ultimate tax burden.

If the demand curve is more elastic than the supply curve, consumers will bear the majority of the burden of an increase in a tax placed on buyers.

If the demand curve is much more inelastic than the supply curve, then buyers will shoulder more of the burden of a tax placed on suppliers of a product.

D. The elasticity of demand and supply curves has no relevance for the ultimate tax burden.

2.) Which of the following is NOT true about profit maximization for a firm?

Profit maximization occurs where marginal revenue equals marginal cost.

Profit maximization occurs where the profit per unit of the last unit produced is close to and just equal to zero.

Profit maximization occurs where the marginal revenue product of an input equals the marginal cost of employing or using that input.

Profit maximization occurs where output is restricted below the point where the marginal social benefit of the last unit of production is just equal to the marginal social cost of making that unit.

Solution

1.) Whoever has inelastic demand have to bear most of the burden of tax because they cannot change their demand in response to increase in tax .So only c is correct.If the demand curve is much more inelastic than the supply curve, then buyers will shoulder more of the burden of a tax placed on suppliers of a product.

2.)All are true except B.

Profit maximization occurs where profit is positive and maximum not zero.