Questions: Refer to the graph shown. Assume that the market is initially in equilibrium at a price of 6 and a quantity of 40 units. If the government imposes a 2 per-unit tax on this product, the equilibrium price will change to:

Refer to the graph shown. Assume that the market is initially in equilibrium at a price of 6 and a quantity of 40 units. If the government imposes a 2 per-unit tax on this product, the equilibrium price will change to:
Transcript text: 3 MC Qu. 43 Refer to the graph shown. Assume that the... Refer to the graph shown. Assume that the market is initially in equilibrium at a price of $\$ 6$ and a quantity of 40 units. If the government imposes a $\$ 2$ per-unit tax on this product, the equilibrium price will change to: Multiple Choice
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Solution

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Solution Steps

Step 1: Find the initial equilibrium

The initial equilibrium is where the supply curve S0 intersects the demand curve. This point is at a price of $6 and a quantity of 40.

Step 2: Determine the new supply curve with the tax

A $2 per-unit tax shifts the supply curve up by $2. This creates the new supply curve S1.

Step 3: Find the new equilibrium

The new equilibrium is where S1 intersects the demand curve. This occurs at a price of $8 and a quantity of 30.

Final Answer:

$8

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