There have been proposals that a tax be imposed on sugar-laden soft drinks in an attempt to reduce their consumption.Assume for simplicity that all bottled soft drinks are the same size.Suppose the initial market equilibrium is P = $2.00 and Q = 1000. FIGURE 4-4
-Refer to Figure 4-4.Suppose the government imposes a tax of $0.60 per soft drink purchased.The change in total expenditure on soft drinks is
A)a decrease of $80.
B)a decrease of $160.
C)an increase of $320.
D)an increase of $480.
E)No change in total expenditure.

Question

There have been proposals that a tax be imposed on sugar-laden soft drinks in an attempt to reduce their consumption.Assume for simplicity that all bottled soft drinks are the same size.Suppose the initial market equilibrium is P = $2.00 and Q = 1000.  FIGURE 4-4
-Refer to Figure 4-4.Suppose the government imposes a tax of $0.60 per soft drink purchased.The change in total expenditure on soft drinks is
A)a decrease of $80. 
B)a decrease of $160. 
C)an increase of $320. 
D)an increase of $480. 
E)No change in total expenditure.

Quizplus · Accepted Answer

The tax of $0.60 per soft drink purchased will reduce the quantity of soft drinks demanded from 400 to 200. The total expenditure on soft drinks will decrease by $80 (400 x $0.20 = $80).

There Have Been Proposals That a Tax Be Imposed on Sugar-Laden