18. Given the following graph, calculate the government tax revenue.0.90.80.78 0.6Price per CD.0.50.40.30.20.100(a) $4 million1020304075060(b) $8 million(c) $16 million(d) $28 million(e) There is not enough information to answer this question.S270D80S1490gupply in

The imposition of tax on a product increases the production cost of that product. An increase in the production cost of a product leads to a decrease in the production of that product at each price. As a result, the supply curve of the product shifts to the left. S1 is the original supply curve. Due to the imposition of tax, the supply curve shifts to the left. Hence, the supply curve after tax is S2.The quantity at the intersection of S2 and D is 40 million units. Hence, the quantity after tax is 40 million units. ___________________The price of 40 million units on the demand curve (D) is 0.7. This means price paid by the buyer after tax is 0.7 per unit. The price of 40 million units on the original supply curve (S1) is 0.5. This means the price received by the seller after tax is 0.5 per unit. Tax per unit = Price paid by buyer after-tax - Prie received by seller after tax=> Tax per unit = 0.7 - 0.5=> Tax per unit = 0.2Hence, the tax per unit is 0.2_____________Tax revenue = Quantity after-tax × Tax per unit=> Tax revenue = 40 million × 0.2=> Tax revenue = 8 million. Hence, the government tax revenue is $8 million. ____________________________________________________________Answer: Option (b), i.e., $8 million.

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Given the following graph, calculate the government tax revenue.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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18. Given the following graph, calculate the government tax revenue.
0.9
0.8
0.7
8 0.6
Price per CD.
0.5
0.4
0.3
0.2
0.1
0
0
(a) $4 million
10
20
30
40
7
50
60
(b) $8 million
(c) $16 million
(d) $28 million
(e) There is not enough information to answer this question.
S2
70
D
80
S1
4
90
gupply in

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