Use the following to answer questions :
Figure: The Shrimp Market
-(Figure: The Shrimp Market)Use Figure: The Shrimp Market.If the government wants to limit shrimp sales to 250 kilograms,it can impose a _____ excise tax on sellers,and the total tax revenue generated will be _____.

Question

Use the following to answer questions :
Figure: The Shrimp Market 
-(Figure: The Shrimp Market)Use Figure: The Shrimp Market.If the government wants to limit shrimp sales to 250 kilograms,it can impose a _____ excise tax on sellers,and the total tax revenue generated will be _____.

Quizplus · Accepted Answer

To limit shrimp sales to 250 kilograms, the government needs to create a vertical line at the quantity of 250 on the x-axis. From this point, the line should intersect the supply curve. The point where the line intersects the supply curve will determine the new equilibrium price. This new price is $10 per kilogram.

To calculate the excise tax, we need to find the difference between the new price and the original price. The original price is $8 per kilogram. Therefore, the excise tax is $10 - $8 = $2 per kilogram.

If the government limits sales to 250 kilograms, the total tax revenue will be:

Total tax revenue = excise tax per kilogram x total quantity sold

Total tax revenue = $2 per kilogram x 250 kilograms

Total tax revenue = $500

Therefore, the correct answer is C.

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