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. What is the total burden of the tax?

Question

Quizplus · Accepted Answer

The total burden of the tax can be calculated by multiplying the tax per unit ($1) by the quantity of goods sold after the tax is imposed. Initially, at a price of $5, the quantity demanded (Q) can be found by rearranging the demand equation to Q = 40 - 4P and substituting P = 5, giving Q = 20. After the tax, the price consumers pay rises to $6, leading to a new quantity demanded of Q = 40 - 4*6 = 16. The total tax burden is the tax per unit ($1) times the new quantity sold (16 units), which equals $16. However, since the correct answer is not listed, the explanation provided aims to clarify the approach to find the total tax burden, suggesting a potential misunderstanding in the question's setup or a mistake in the calculation process.