Refer to the graph below. Which of the following statements is correct?

Question

Quizplus · Accepted Answer

The graph shows a vertical shift upwards of the demand curve, indicating that the tax is being levied on buyers of the good. Therefore, statement C is correct. Statement A is incorrect because the amount of the tax per unit is actually €4 (the distance between the original demand curve and the new demand curve at the quantity level where the tax is imposed). Statement B is also incorrect because the graph shows a decrease in the quantity of the good sold after the tax is imposed, indicating that the tax does affect the size of the market.

Refer to the Graph Below