Figure 18-2 shows a demand curve and two sets of supply curves,one set more elastic than the other.
-Refer to Figure 18-2.If the government imposes an excise tax of $1.00 on every unit sold,the government's revenue from the tax is represented by the area
A)(PaPc × Qa)if the supply curve is S0 and (PbPc × Qb)if the supply curve is S1.
B)(PaPd × Qa)if the supply curve is S0 and (PbPe × Qb)if the supply curve is S1.
C)(PaPe × Qa)under either supply curve.
D)(PbPe × Qb)under either supply curve.

Question

Figure 18-2 shows a demand curve and two sets of supply curves,one set more elastic than the other.
-Refer to Figure 18-2.If the government imposes an excise tax of $1.00 on every unit sold,the government's revenue from the tax is represented by the area
A)(PaPc × Qa)if the supply curve is S0 and (PbPc × Qb)if the supply curve is S1. 
B)(PaPd × Qa)if the supply curve is S0 and (PbPe × Qb)if the supply curve is S1. 
C)(PaPe × Qa)under either supply curve. 
D)(PbPe × Qb)under either supply curve.

Quizplus · Accepted Answer

The government's revenue from the tax is represented by the difference between the price paid by buyers (represented by point a on the demand curve) and the price received by sellers (represented by point d under S0 supply curve and point e under S1 supply curve), multiplied by the quantity sold. Therefore, the government's revenue is (PaPd x Qa) under S0 supply curve and (PbPe x Qb) under S1 supply curve.

Figure 18-2 Shows a Demand Curve and Two Sets of Supply