The market for skateboards currently has no taxes. The equilibrium quantity is 5,000/month, and the equilibrium price is $40. The governor is considering placing a $10/skateboard tax on skateboard producers, and expects to raise $50,000/month in revenue. Is the governor correct? O No, because it doesn't matter whether the consumer or producer is taxed. O Yes, because producer and consumer responses will cancel out. O No, because the quantity produced and consumed will fall below 5,000/month once the tax is imposed. O Yes, because 5,000 x $10 = $50,000.
The market for skateboards currently has no taxes. The equilibrium quantity is 5,000/month, and the equilibrium price is $40. The governor is considering placing a $10/skateboard tax on skateboard producers, and expects to raise $50,000/month in revenue. Is the governor correct? O No, because it doesn't matter whether the consumer or producer is taxed. O Yes, because producer and consumer responses will cancel out. O No, because the quantity produced and consumed will fall below 5,000/month once the tax is imposed. O Yes, because 5,000 x $10 = $50,000.
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter6: Supply, Demand And Government Policies
Section: Chapter Questions
Problem 3CQQ
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