Suppose Mishka buys 15 apples per month her total tax burden from a $3 per apple tax is $100 every month.
A)Her excess burden is $45.
B)Her excess burden is $6.67 per apple.
C)Her excess burden is greater than her taxes paid.
D)Her taxes paid are greater than her tax burden.

Question

Quizplus · Accepted Answer

The total tax paid by Mishka every month is:
Total Tax = $3 x 15 apples = $45

Her excess burden can be calculated using the formula:

Excess burden = (Change in consumer surplus + change in producer surplus) / Tax revenue

Since there is no information given about any change in producer surplus, we can assume that it remains constant. Therefore, the excess burden can be calculated as:

Excess burden = Change in consumer surplus / Tax revenue

To calculate the change in consumer surplus, we need to find out the new equilibrium price with the tax, which can be calculated as:

Price with tax = Price without tax + Tax = $3 + $3 = $6

At a price of $6, Mishka will buy fewer apples than before due to the higher price. Let's assume that Mishka is now buying 12 apples per month. The change in consumer surplus can be calculated as:

Change in consumer surplus = 0.5 x (15 - 12) x (9 - 6) = $13.50

Therefore, the excess burden can be calculated as:

Excess burden = $13.50 / $45 = $0.30 per apple

Thus, the excess burden is $0.30 per apple, which is equivalent to choice B.

Suppose Mishka Buys 15 Apples Per Month Her Total Tax