Scenario 12-1
Max and Mark enjoy beer. Max places a $23 value on a bottle of beer, and Mark places a $18 value on it. The equilibrium price for a bottle of beer is $14.
-Refer to Scenario 12-1. Suppose the government levies a tax of $6 on each bottle of beer, and the equilibrium price of a bottle of beer increases to $20. How much tax revenue is collected?
A)$0
B)$0.5
C)$6
D)$13

Question

Quizplus · Accepted Answer

The tax revenue collected from each bottle of beer is $6 (the amount of the tax). Since both Max and Mark will still purchase the beer at the new equilibrium price of $20 (which is less than the value they place on it), the government collects $6 in tax for each bottle sold to them, totaling $12. However, the question asks for the tax revenue collected per bottle, which is $6, making the correct answer $6.

Scenario 12-1 Max and Mark Enjoy Beer. Max Places a $23 Value