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Figure: The Gasoline Market
-(Figure: The Gasoline Market) Look at the figure The Gasoline Market. The pretax equilibrium price is $3, and the equilibrium quantity before tax is 20,000 gallons. An excise tax has been levied on each gallon of gasoline supplied by producers, shifting the supply curve upward. What is the tax rate?

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Use the following to answer questions:
Figure: The Gasoline Market 
-(Figure: The Gasoline Market) Look at the figure The Gasoline Market. The pretax equilibrium price is $3, and the equilibrium quantity before tax is 20,000 gallons. An excise tax has been levied on each gallon of gasoline supplied by producers, shifting the supply curve upward. What is the tax rate?

Quizplus · Accepted Answer

The tax rate is the vertical distance between the original supply curve and the new supply curve. In this case, the vertical distance is $1.75 per gallon.

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