A $10 Per-Unit Tax on MP3 Players Raises the Equilibrium

question 112

Multiple Choice

A $10 per-unit tax on MP3 players raises the equilibrium price paid by consumers by $5.The quantity sold before the tax was 5,000 per year.The revenue from the tax is

• A)zero.
• B)positive but less than $50,000 per year.
• C)$50,000 per year.
• D)more than $50,000 per year.
• E)greater the more elastic is demand.

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Definitions:

Market-clearing Price

The price at which the quantity demanded by buyers equals the quantity supplied by sellers, eliminating any surplus or shortage in the market.

Surplus

The condition in which the quantity of a good or service supplied exceeds the quantity demanded at the current price.

Foreign Currency

Currency used in a country other than one's own, involved in international trade, investments, and travel.

Quota

A government-imposed trade restriction that limits the quantity or monetary value of goods that can be imported or exported during a specific time.