Suppose the federal government decides to levy a sales tax


Question: Suppose the federal government decides to levy a sales tax of $1.00 per pie on pizza. Briefly explain whether you agree with the following statement, made by a representative of the pizza industry: The pizza industry is very competitive. As a result, pizza sellers will have to pay the whole tax because they are unable to pass any of it on to consumers in the form of higher prices. Therefore, a sales tax of $1.00 per pie will result in pizza sellers receiving $1.00 less on each pie sold, after paying the tax. Illustrate your answer with a graph.

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Microeconomics: Suppose the federal government decides to levy a sales tax
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