the figure shows the market for beer. the government plans to impose a unit tax in this market. what is the…

the figure shows the market for beer. the government plans to impose a unit tax in this market. what is the total revenue that the government collects from this sales tax. a. $350 b. $630 c. $700 d. $490

the figure shows the market for beer. the government plans to impose a unit tax in this market. what is the total revenue that the government collects from this sales tax. a. $350 b. $630 c. $700 d. $490

Answer

Explanation:

Step1: Identify tax - per - unit and quantity sold

The tax per unit is the vertical distance between the pre - tax and post - tax supply curves at the equilibrium quantity. From the graph, the price consumers pay is $27 and the price producers receive is $20, so the tax per unit $t=27 - 20=7$. The quantity sold after the tax is imposed is $Q = 90\times1000$ (since the quantity is in thousands of cases).

Step2: Calculate total tax revenue

The formula for total tax revenue $TR$ is $TR=t\times Q$. Substituting $t = 7$ and $Q=90000$ into the formula, we get $TR=7\times90000 = 630000$. But since the quantity was in thousands of cases, the total tax revenue is $630$.

Answer:

B. $630$