Consider an excise tax imposed on daily parking charges in the downtown of a small city.Before the imposition of the tax,equilibrium price and quantity are $15 and 100 cars parked.(P = $15,Q = 100).The city government imposes a tax of $3 per car parked per day.Market equilibrium adjusts to P = $16 and Q = 95.After imposition of the tax,what is the daily after-tax price received by the seller per car parked?
A)$1
B)$3
C)$13
D)$15
E)$16

Question

Quizplus · Accepted Answer

The excise tax of $3 per car parked is paid by the buyers, but it affects the market equilibrium price and quantity. The new equilibrium price after the tax is $16, which is paid by the buyers, but the sellers do not receive the whole amount. To find out the after-tax price received by the seller, we need to subtract the tax amount from the equilibrium price.

The tax amount per car parked is $3, so the after-tax price received by the seller is $16 - $3 = $13 per car parked. Therefore, the correct answer is (C) $13.

Consider an Excise Tax Imposed on Daily Parking Charges in the Downtown