Figure 8-5

-Refer to Figure 8-5.When the tax is placed on this good,what are the quantity sold and the price buyers will pay
A)300 units sold and buyers will pay $10
B)600 units sold and buyers will pay $10
C)300 units sold and buyers will pay $16
D)600 units sold and buyers will pay $16

Question

Figure 8-5
 
-Refer to Figure 8-5.When the tax is placed on this good,what are the quantity sold and the price buyers will pay
A)300 units sold and buyers will pay $10 
B)600 units sold and buyers will pay $10 
C)300 units sold and buyers will pay $16 
D)600 units sold and buyers will pay $16

Quizplus · Accepted Answer

When a tax is imposed on a good, the supply curve shifts upward by the amount of the tax. In this case, the tax is $6, so the supply curve shifts from S1 to S2.

At the old equilibrium price of $10, quantity demanded is 600 units and quantity supplied is 300 units, which creates a shortage of 300 units. This means the price will rise until the quantity demanded equals the quantity supplied.

At the new equilibrium price of $16 (where the demand curve intersects the new, higher supply curve), quantity demanded is 300 units and quantity supplied is 300 units. This is the quantity sold and the price buyers will pay. Therefore, the correct answer is C.

Figure 8-5 -Refer to Figure 8-5.When the Tax Is Placed on This