80 70 60.00 50 40 MC 30 20 10 0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.0

Question

80 70 60.00 50 40 MC 30 20 10 0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 45.00 50.00 Quantty (Thousands ofvisits per day) S per ticket a. In the example with th@ stato park from the pre ous exercise, what is the tax per admission ticket if the government imposes a Pigov an tax? Tax What distanoe on the graph represents the tax per admission ticket? B.AD O D. EF b·lf the government imposes a Pigovian tax, how many admissions tickets will be sold? Q visits per day c. How much tax revenue would the government would collect if they imposed a Pigovian tax? Tax Revenue = What area on the graph represents the government's tax revenue? OA. EFH OD. EGHF E. BEFD

Explanation / Answer

(a)

As it is clear from the diagram when the government imposes Pigouvian tax, then the Pigouvian tax will be

= 30-15 =$15 per ticket.

This tax has been represented on the graph by the distance EF.

Hence option D is the correct answer.

(b)

With the imposition of tax, the quantity sold will be determined by the ;

(MC+Tax)MSC=MB

hence the quantity sold will be Q= 15 visit per day.

c.

With the imposition of tax, the tax revenue will be= area of rectangle (BEFD)

=L*B

=15* ( 30-15)

=15*15

Tax revenue =$225

on the graph the tax revenue is represented by area of rectangle (BEFD).

Hence option E is the correct answer.

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