Use the following to answer question:
-(Figure: The Market for Productivity Apps)Use Figure: The Market for Productivity Apps.If the government imposes a tax of $1 in this market,consumers will pay _____ more per app and purchase _____ fewer apps.

Question

Use the following to answer question: 
-(Figure: The Market for Productivity Apps)Use Figure: The Market for Productivity Apps.If the government imposes a tax of $1 in this market,consumers will pay _____ more per app and purchase _____ fewer apps.

Quizplus · Accepted Answer

When the government imposes a tax of $1 in this market, the equilibrium point will shift from (Q1, P1) to (Q2, P2). Consumers will pay $0.50 more per app, as the tax will be shared between buyers and sellers. The difference between P1 and P2 is $1. Therefore, the seller will receive $0.50 less than before. This will shift the supply curve from S1 to S2. As a result, the quantity demanded will decrease from Q1 to Q2, which is a reduction of 5 apps, as shown in the graph. Hence, the correct answer is C.

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