Figure 4-8 Figure 4-8 shows the market for beer. The government plans to impose a unit tax in this market.
-Refer to Figure 4-8.What is the size of the unit tax?

Question

Figure 4-8  Figure 4-8 shows the market for beer. The government plans to impose a unit tax in this market.
-Refer to Figure 4-8.What is the size of the unit tax?

Quizplus · Accepted Answer

The unit tax is shown by the vertical distance between the supply curves, which is $7 in this case. Consumers will bear $5 of the tax (the increase in price from P₁ to P₂) and producers will bear $2 of the tax (the decrease in price received from P₀ to P₁). The deadweight loss is represented by the shaded triangle in the diagram.

Figure 4-8 Figure 4-8 Shows the Market for Beer