### Educational Content on Tax Revenue and Market Equilibrium#### Explanation of the DiagramThe diagram illustrates the supply and demand curves in a market. The vertical axis represents the price, ranging from 0 to 12, while the horizontal axis indicates the quantity, ranging from 0 to 6.- **Supply Curve:** The upward-sloping line labeled "Supply" shows the relationship between price and quantity supplied. As price increases, the quantity supplied also increases. - **Demand Curve:** The downward-sloping line labeled "Demand" reflects the relationship between price and quantity demanded. As price decreases, the quantity demanded increases.#### Points of Interest- **Point A:** This is located on the supply curve at a price of 9 and a quantity of 2.- **Point B:** This is found on the demand curve at a price of 7 and the same quantity of 2.The vertical distance between points A and B symbolizes a tax imposed in the market, which is the reason for the difference in price between the supply and demand curves at a quantity of 2.#### Calculation of Tax RevenueThe tax per unit is the difference in price between points A and B, which is 9 - 7 = 2 (dollars per unit). At a quantity of 2 units, the total tax revenue is calculated by multiplying the tax per unit by the quantity: \[ \text{Tax Revenue} = 2 \text{ (tax per unit)} \times 2 \text{ (quantity)} = 4 \text{ dollars} \]#### Question and Options**Refer to Figure 8-2.** The amount of tax revenue received by the government is:- a. $2.50- b. $9- c. $4- d. $5The correct answer is **c. $4**.This content is designed to help students understand the effect of taxes on market equilibrium, and how to calculate tax revenue using supply and demand curves.

The government sets a maximum and minimum price for products in the market. The regulation of these…

Question Completion Status: THC Vertical distance between points A anu D represents a tax in the market. PRICE 216987 11 10 5 4 3 32w 2 1 B Supply Demand HH 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6 QUANTITY Refer to Figure 8-2. The amount of tax revenue received by the government is a. $2.50. b. $9. C. $4. d. $5. Moving to another question will save this response. M

Question Completion Status: THC Vertical distance between points A anu D represents a tax in the market. PRICE 216987 11 10 5 4 3 32w 2 1 B Supply Demand HH 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6 QUANTITY Refer to Figure 8-2. The amount of tax revenue received by the government is a. $2.50. b. $9. C. $4. d. $5. Moving to another question will save this response. M

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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