(Figure: Tax on Sellers of Soft Drinks) In the graph of the soft drink market shown here, the original equilibrium price is $2.50 per bottle. A tax is then placed on the sellers of soft drinks. As a result of the tax, the equilibrium quantity in the market changed from _____ million bottles to _____ million bottles.
A)2.5, 1.5
B)0.5, 1
C)1.5, 1
D)1, 1.5

Question

(Figure: Tax on Sellers of Soft Drinks) In the graph of the soft drink market shown here, the original equilibrium price is $2.50 per bottle. A tax is then placed on the sellers of soft drinks. As a result of the tax, the equilibrium quantity in the market changed from _____ million bottles to _____ million bottles. 
A)2.5, 1.5 
B)0.5, 1 
C)1.5, 1 
D)1, 1.5

Quizplus · Accepted Answer

The tax on sellers shifts the supply curve upward by the amount of the tax. The new equilibrium quantity will be lower than the original equilibrium quantity, and the new equilibrium price will be higher than the original equilibrium price. In this case, the tax is $1 per bottle, so the supply curve shifts upward by $1. The new equilibrium quantity is 1.5 million bottles and the new equilibrium price is $3 per bottle. Therefore, the correct answer is choice C, with an equilibrium quantity of 1.5 million bottles.

(Figure: Tax on Sellers of Soft Drinks) in the Graph