The graphs show the market for bags of potato chips, which is currently at an equilibrium price of $1.33 per bag and an equilibrium quantity of 5.33 million bags. Suppose that, in an attempt to lower blood pressure and reduce healthcare costs, the government imposes a $1.00 excise (or commodity) tax on potato chips. Suppose the government levies this tax on manufacturers for each bag of potato chips they produce. Please shift the appropriate curve or curves to illustrate this. Price ($ per bag) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 0 1 2 3 4 5 6 Quantity (millions of bags) 7 8 Supply Demand 9 10
The graphs show the market for bags of potato chips, which is currently at an equilibrium price of $1.33 per bag and an equilibrium quantity of 5.33 million bags. Suppose that, in an attempt to lower blood pressure and reduce healthcare costs, the government imposes a $1.00 excise (or commodity) tax on potato chips. Suppose the government levies this tax on manufacturers for each bag of potato chips they produce. Please shift the appropriate curve or curves to illustrate this. Price ($ per bag) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 0 1 2 3 4 5 6 Quantity (millions of bags) 7 8 Supply Demand 9 10
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:What is the price paid per bag by consumers (Pc) with this
new tax?
What is the price received net of tax (Pp) per bag by
producers with this new tax?
Pc =
P₁ =
$
$
Transcribed Image Text:The graphs show the market for bags of potato chips, which
is currently at an equilibrium price of $1.33 per bag and an
equilibrium quantity of 5.33 million bags. Suppose that, in an
attempt to lower blood pressure and reduce healthcare costs,
the government imposes a $1.00 excise (or commodity) tax
on potato chips.
Suppose the government levies this tax on manufacturers for
each bag of potato chips they produce. Please shift the
appropriate curve or curves to illustrate this.
Price ($ per bag)
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
0
1
2
3 4 5 6
Quantity (millions of bags)
7
8
Supply
Demand
9
10
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