Use the figure below to answer the following questions. Figure 6.3.1
-Refer to Figure 6.3.1 showing the market for frisbees before and after a tax is imposed.The tax on each frisbee is
A)$0.40.
B)$0.60.
C)$1.00.
D)$5.60.
E)$6.60.

Question

Use the figure below to answer the following questions.  Figure 6.3.1
-Refer to Figure 6.3.1 showing the market for frisbees before and after a tax is imposed.The tax on each frisbee is
A)$0.40. 
B)$0.60. 
C)$1.00. 
D)$5.60. 
E)$6.60.

Quizplus · Accepted Answer

The tax shifts the supply curve upwards by the amount of the tax, which is $0.60. This results in a new equilibrium price of $4.60 and quantity of 3 million frisbees. Consumers now pay $1.10 more per frisbee ($4.60 - $3.50) and producers receive $0.50 less per frisbee ($4.60 - $4.10). The government collects a total tax revenue of $1.8 million ($0.60 tax x 3 million frisbees).

Use the Figure Below to Answer the Following Questions