Use the following to answer question:
-(Figure: The Market for SUVs)Use Figure: The Market for SUVs.If the government imposes a $30,000 tax on SUVs (collected from the producers),the price of SUVs will rise to _____ and the government will collect _____.

Question

Use the following to answer question: 
-(Figure: The Market for SUVs)Use Figure: The Market for SUVs.If the government imposes a $30,000 tax on SUVs (collected from the producers),the price of SUVs will rise to _____ and the government will collect _____.

Quizplus · Accepted Answer

When a $30,000 tax is imposed on SUVs, the supply curve shifts upward by the amount of the tax. The new market equilibrium occurs where the supply and demand curves intersect at point E with a price of $140,000 and a quantity of 600,000. The total tax revenue collected by the government is the tax per unit times the quantity sold, which in this case is $30,000 times 600,000 SUVs, or $18 billion.

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