Refer to Scenario 19.4 below to answer the question(s) that follow.
SCENARIO 19.4: Suppose demand for widgets is given by the equation P = 10 - 0.25Q. Originally, the price of the good is $5 per unit. When a tax of $1 per unit is imposed, the price of the good rises to $6 per unit.
-Refer to Scenario 19.4. How much total tax revenue is raised by the tax?

Question

Quizplus · Accepted Answer

To find the total tax revenue, we first need to determine the quantity of widgets sold after the tax is imposed. The new price to consumers is $6, so we can substitute P = 6 into the demand equation to find Q: 6 = 10 - 0.25Q. Solving for Q gives us Q = 16. Since the tax is $1 per unit, and 16 units are sold, the total tax revenue is 16 units * $1/unit = $16.