(Figure: Market) In the market shown, the original equilibrium price is 60 cents. A tax is then implemented on the buyer. After the implementation of the tax, the buyer pays a price of _____ cents per unit of the product.

Question

Quizplus · Accepted Answer

When a tax is implemented on the buyer, the demand curve shifts downwards by the amount of the tax. In this case, the tax amount is not given, so we can only determine the new equilibrium price by using the information given in the answer choices. At a price of 58 cents, there would be excess demand, so we can eliminate choice A. At a price of 60 cents, there would be no change in quantity demanded or supplied, so we can eliminate choice B. At a price of 64 cents, there would be excess supply, indicating that the new equilibrium price is lower than 64 cents. Therefore, the correct answer is C, 64 cents. Note that D can also be eliminated as it is not a feasible price given the original equilibrium.

(Figure: Market) in the Market Shown, the Original Equilibrium Price