Assu me ne government imposes a u./5 excise ax on tne sale or every 1ter Dotue o

Question

Assu me ne government imposes a u./5 excise ax on tne sale or every 1ter Dotue oT Soaa. I ne IS to De pala Dy tne proaucers of soda. The figure below shows the annual market for 2 liter bottles of soda before and after the tax is imposed 27 Market for Soda 4.0 3.5 3.0 E 2.5 2.0 0.1 points Print 1.0 0.5 0 1 2 3 4 5 6 78 Quantity (billions of bottles) Instructions: Round your answers for price to two decimal places. Enter your answers for quantity as a whole number a. Before the tax is imposed, the equilibrium price is $ per bottle and the equilibrium quantity is billion bottles. b. After the excise tax is imposed, consumers pay a price of $ per bottle c. After the excise tax is imposed, the price (or amount) producers keep after the tax is paid is $ d. After the tax is imposed, the equilibrium quantity ison bottles. e. The aovernment is able to collect $ 1 billion of tax revenue from the tax. per bottle

Explanation / Answer

27.

a. before tax equilibrium price= $1.5 and equibrium quantity = 4 (billions of bottles)

Just connect the lines on the graph, by observation also it is possible to answer.

b.After tax consumers pay =$2.

c.producers are able to keep= $ 1.25( just make vertical line from after tax price of $2 till oroginal supply line and check where it touches on vertical axis.

d. After tax equibrium quantity = 3 (billion of bottles)

e. govt. collects=0.75*3= 2.25 $billion(tax is $0.75 this is to be multiplied by after tax quantity supplied)

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