1. Figure 18-2 shows the widget market before and after an excise tax is imposed

Question

1. Figure 18-2 shows the widget market before and after an excise tax is imposed. The tax per widget equals

a. $5 b. $20 c. $25 d. $30

2. Figure 18-2 shows the widget market before and after an excise tax is imposed. After the tax is imposed, the amount that a firm keeps for itself from the sale of each widget is

a. $95 b. $100 c. $120 d. $125

3. Figure 18-2 shows the widget market before and after an excise tax is imposed. The revenue collected by the tax is

a. $8000 b. $50,000 c. $100,000 d. $150,000

4. Figure 18-2 shows the widget market before and after an excise tax is imposed. What percentage of the tax per widget is borne by consumers, considering the true economic incidence of the tax?

a. 0 percent b. 20 percent c. 50 percent d. 80 percent

1. Figure 18-2 shows the widget market before and after an excise tax is imposed. The tax per widget equals a. $5 b. $20 c. $25 d. $30 2. Figure 18-2 shows the widget market before and after an excise tax is imposed. After the tax is imposed, the amount that a firm keeps for itself from the sale of each widget is a. $95 b. $100 c. $120 d. $125 3. Figure 18-2 shows the widget market before and after an excise tax is imposed. The revenue collected by the tax is a. $8000 b. $50,000 c. $100,000 d. $150,000 4. Figure 18-2 shows the widget market before and after an excise tax is imposed. What percentage of the tax per widget is borne by consumers, considering the true economic incidence of the tax? a. 0 percent b. 20 percent c. 50 percent d. 80 percent

Explanation / Answer

1: C

AT quantity 4000, price with tax is =120, price without tax is =95,

Vertical difference between two graph is tax=120-95=25

2: A

After tax the equilibrium quantity is 4000, at market price=120

Tax is 25, so producer keeps120-25=95

3.C

Revenue=tax rate* quantity sold

Revenue=25*4000=$100,000

4.D

Before tax consumer were paying 100 (demand equals supply with tax)

After tax consumer is paying 120

Tax rate is 25

So percentage= (120-100)*100/25=80

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