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,producers will receive _____ less per app and sell _____ 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,producers will receive _____ less per app and sell _____ fewer apps.

Quizplus · Accepted Answer

DWhen a tax is imposed, it typically affects both the price received by producers and the quantity sold. In this case, a $1 tax does not mean producers receive $1 less per app directly because the tax burden is shared between producers and consumers. The correct interpretation is that the tax shifts the supply curve upwards by the amount of the tax. This results in a new equilibrium where the price consumers pay is higher, and the price producers receive is lower than before the tax. The difference between these two prices is the tax. If producers receive $0.50 less per app, it indicates that the tax burden is split between consumers and producers. The quantity sold decreases as a result of the tax, which leads to a decrease in the equilibrium quantity. The specific numbers (e.g., $0.50 less per app and 20 fewer apps) depend on the details of the supply and demand curves in the figure, which are not provided here. However, the general principle is that a tax causes the price received by sellers to decrease and the quantity sold in the market to decrease as well.

Use the Following to Answer Question