Refer to the above data.If government levies a per-unit excise tax of $1 on suppliers of this product,equilibrium price and quantity will be:

Question

Quizplus · Accepted Answer

When an excise tax is imposed on suppliers, the supply curve shifts upward by the amount of the tax. In this case, the tax is $1 per unit, so the new supply curve is S + $1.

To find the new equilibrium price and quantity, we need to find where this new supply curve intersects with the original demand curve.

At a price of $8.50, the quantity supplied is 2,250 (point A). At this price, the quantity demanded is also 2,250 (point B).

However, with the $1 tax, the price received by suppliers will be $7.50 ($8.50 - $1), while buyers will still pay $8.50. This means that suppliers bear $1 of the tax burden, while buyers bear the remaining $0.50.

Therefore, the new equilibrium price will be $8.50 for buyers, but only $7.50 for suppliers. The new equilibrium quantity will be 2,250 (the same as before).

Thus, the correct answer is C. $8.50 and 2,250.

Refer to the Above Data