Figure 18-2
-Figure 18-2 shows the widget market before and after an excise tax is imposed.After the tax is imposed, the amount that a firm keeps for itself from the sale of each widget is ____.
A)$95
B)$100
C)$120
D)$125

Question

Figure 18-2 
-Figure 18-2 shows the widget market before and after an excise tax is imposed.After the tax is imposed, the amount that a firm keeps for itself from the sale of each widget is ____.
A)$95 
B)$100 
C)$120 
D)$125

Quizplus · Accepted Answer

After an excise tax is imposed, the price that firms receive (what they keep for themselves) is the price consumers pay minus the tax. If the price before tax was higher and then it decreases by the amount of the tax, the new price (what the firm keeps) would be lower than the original price, making $95 a plausible answer without seeing the specific figures.

Figure 18-2 -Figure 18-2 Shows the Widget Market Before and After an and After