Figure 8-7 The vertical distance between points A and B represents a tax in the

Question

Figure 8-7 The vertical distance between points A and B represents a tax in the market. Price Supply Demend 310 15 20 25 30 35 40 45 50 55 60 atty 1. Refer to Figure 8-7. Before the tax is imposed, the equilibrium price is a. $32, and the equilibrium quantity is 15 b. $24, and the equilibrium quantity is 15 C. $24, and the equilibrium quantity is 25 d. $16, and the equilibrium quantity is 15. Refer to Figure 8-7. As a result of the tax, buyers effectively pay $32 for each unit of the good, and sellers effectively receive $24 for each unit of the good. $32 for each unit of the good, and sellers effectively receive $16 for each unit of the good. $24 for each unit of the good, and sellers effectively receive $16 for each unit of the good. $28 for each unit of the good, and sellers effectively receive $20 for each unit of the good. Refer to Figure 8-7. Consumer Surplus before tax- a. $250 Refer to Figure 8.7 Consumer Surplus after tax 2. a. b. c. d. 3. b. $500 b. $500 c.$180 d. $90 (b) $32 (b) $32 (b) 60 c. $180 d.$90 4. a. $250 Refer to Figure 8.7. (a) $44 Refer to Figure 8.7. After tax price producers effectively receive is (a) $44 Refer to Figure 8.7 After tax Government Tax collection is After tax price consumer effectively pay after tax 5. 6. 7. (c) $24 (c) $24 (c)240 (d) $16 (d) $16 (d) 500

Explanation / Answer

1.

C

It is as per the details depicted in the graph.

2.

B

It is as per the details depicted in the graph.

3.

A.

Consumer surplus before tax = (1/2)*(44-24)*25 = $250

4.

D.

Consumer surplus after tax = (1/2)*(44-32)*15 = $90

5.

B

It is the price paid inclusive of the tax.

6.

D

It is the amount received after the deduction of the tax.

7.

C.

Tax collection = 16*15 = $240

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