In the market for doodads, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. The equilibrium quantity in the market for doodads is 150 per month when there is no tax. Then a tax of $3 per doodad is imposed. As a result, the government is able to raise $300 per month in tax revenue. We can conclude that the equilibrium quantity of widgets has fallen by
A)50 per month.
B)100 per month.
C)150 per month.
D)53 per month.

Question

Quizplus · Accepted Answer

The tax revenue is $300, and the tax per doodad is $3, so the quantity sold after the tax is 100 doodads per month. The original equilibrium quantity was 150, so the quantity has fallen by 50.

In the Market for Doodads, the Supply Curve Is the Typical