The following figure shows the supply and demand curves in a competitive market for a good. The government is considering a $1.50 tax on this good.

-Refer to the above figure.If the $1.50 tax is collected from the producers of this good,the effective price of a unit of this good for the producers will be ________.

Question

The following figure shows the supply and demand curves in a competitive market for a good. The government is considering a $1.50 tax on this good.
 
-Refer to the above figure.If the $1.50 tax is collected from the producers of this good,the effective price of a unit of this good for the producers will be ________.

Quizplus · Accepted Answer

When a $1.50 tax is collected from producers, it effectively lowers the amount they receive for each unit sold. If the original price was $5 (as it would be the price consumers pay including the tax), subtracting the $1.50 tax from this amount gives the producers $3.50 for each unit sold.

The Following Figure Shows the Supply and Demand Curves in a Competitive