The graph below sSHOws the market supply and market demand curves for pencils. P ($) 2.10 1.65 1.25 0.80 0.50 D, 40 60 100 Note: Graph not drawn to scale. The government will introduce a $0.85 tax per pencil. Answer the following questions Prior to the introduction of the tax, what is the equilibrium price and equilibrium quantity in this a. market? b. After the $0.85 tax per pencil is imposed, what is the new price paid by buyers and the price received by sellers? What is the quantity of pencils that will be sold? C. Calculate the tax revenue Explain who bears the largest burden of the tax (largest tax incidence)

The graph below sSHOws the market supply and market demand curves for pencils. P ($) 2.10 1.65 1.25 0.80 0.50 D, 40 60 100 Note: Graph not drawn to scale. The government will introduce a $0.85 tax per pencil. Answer the following questions Prior to the introduction of the tax, what is the equilibrium price and equilibrium quantity in this a. market? b. After the $0.85 tax per pencil is imposed, what is the new price paid by buyers and the price received by sellers? What is the quantity of pencils that will be sold? C. Calculate the tax revenue Explain who bears the largest burden of the tax (largest tax incidence)

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter8: Application: The Cost Of Taxation

Section: Chapter Questions

Problem 10PA

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