Refer to the figure below. Suppose the original before-tax demand curve for champagne is P = 100 - 2Qd. Suppose further that supply is P = 5 + 3Qs. Now suppose a $5 unit tax is imposed on consumers.
(A)What is the before-tax equilibrium price and quantity?
(B)What is the after-tax equilibrium price and quantity?
(C)How much tax revenue is raised?
Definitions:
Residential Hot Water Heater
A device used in homes to heat water for domestic purposes such as bathing and cooking.
Selling Price
The amount a product or service is sold for, which could include profit margins beyond the cost of goods.
Mountain Bikes
Bicycles designed specifically for off-road cycling, featuring durable frames, wide tires with deep tread for added stability and grip on uneven terrain.
Manufacturer's Markup Percent
The percentage added to the cost of goods by manufacturers to determine the selling price.
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