Figure 8-2

-Refer to Figure 8-2.The price that buyers effectively pay after the tax is imposed is
A)P₁.
B)P₂.
C)P₃.
D)impossible to determine from the figure.

Question

Figure 8-2
 
-Refer to Figure 8-2.The price that buyers effectively pay after the tax is imposed is
A)P₁. 
B)P₂. 
C)P₃. 
D)impossible to determine from the figure.

Quizplus · Accepted Answer

The price that buyers effectively pay after the tax is imposed is P₃. This is because the tax is a per-unit tax, which means that the price of the good will increase by the amount of the tax. In this case, the tax is $1 per unit, so the price of the good will increase from P₂ to P₃.

Figure 8-2 -Refer to Figure 8-2.The Price That Buyers Effectively Pay After