Figure 8-2
-Refer to Figure 8-2.Suppose the government changed the per-unit tax from $3.00 to $4.50.Compared to the original tax rate,this higher tax rate would

Question

Figure 8-2 
-Refer to Figure 8-2.Suppose the government changed the per-unit tax from $3.00 to $4.50.Compared to the original tax rate,this higher tax rate would

Quizplus · Accepted Answer

If the per-unit tax is increased from $3.00 to $4.50, the tax wedge between the supply and demand curve will increase, causing the quantity sold to decrease and the equilibrium price to increase. This will result in an increase in tax revenue due to the higher tax rate, but also an increase in deadweight loss as the reduction in quantity sold is greater. Therefore, the correct answer is A.

Figure 8-2 -Refer to Figure 8-2.Suppose the Government Changed the Per-Unit Tax