Exhibit 20-8

-Refer to Exhibit 20-8.The market for good X is initially at point A.A tax is then placed on the production of good X.It follows that the tax is equal to

Question

Exhibit 20-8
 
-Refer to Exhibit 20-8.The market for good X is initially at point A.A tax is then placed on the production of good X.It follows that the tax is equal to

Quizplus · Accepted Answer

The tax causes the supply curve to shift upwards by $2 per unit, as shown by the shift from S to S1. This results in a new equilibrium point at point B, where the price has risen from $8 to $10 per unit and the quantity has decreased from 20 to 18 units. The total tax revenue can be found by multiplying the per-unit tax by the new quantity, which is $2 x 18 = $36. Therefore, the answer is choice B, $2 per unit.

Exhibit 20-8 -Refer to Exhibit 20-8.The Market for Good X Is Initially