Figure 8-13
-Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The amount of tax revenue collected by the government is
A) $120.
B) $80.
C) $50.
D) $30.

Question

Figure 8-13 
-Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The amount of tax revenue collected by the government is
A) $120. 
B) $80. 
C) $50. 
D) $30.

Quizplus · Accepted Answer

With the $5 per-unit tax, the new supply curve will shift upward by $5, resulting in a new equilibrium price of $15 and a new equilibrium quantity of 8.5 units. The tax revenue will be collected by the government for each unit sold, which is equal to $5 multiplied by the new equilibrium quantity of 8.5 units, resulting in a total tax revenue of $42.50. However, since the question asks for the amount "collected by the government" specifically, we can assume that the full amount of the tax is being passed on to the consumer, which means the government is collecting the full $5 per unit. Therefore, the total tax revenue collected by the government is $5 multiplied by the new equilibrium quantity of 8.5 units, resulting in a total tax revenue of $50.

Figure 8-13 -Refer to Figure 8-13. Suppose the Government Places a $5