Figure 15.2

Figure 15.2 shows a demand curve and two sets of supply curves, one set more elastic than the other.
-Refer to Figure 15.2.If the government imposes an excise tax of $1.00 on every unit sold, the government's revenue from the tax is represented by the area

Question

Figure 15.2
  
Figure 15.2 shows a demand curve and two sets of supply curves, one set more elastic than the other.
-Refer to Figure 15.2.If the government imposes an excise tax of $1.00 on every unit sold, the government's revenue from the tax is represented by the area

Quizplus · Accepted Answer

To calculate the government's revenue, we need to find the difference between the price paid by buyers (Pd for S₀ and Pe for S₁) and the price received by sellers (Pc). We then multiply this difference by the quantity sold (Qa for S₀ and Qb for S₁). Therefore, for S₀, the government's revenue is (PₐPd × Qₐ), and for S₁, it is (PbPₑ × Qb).

Figure 15.2 Figure 15.2 Shows a Demand Curve and Two Sets of Curve