To raise funds aimed at providing more support for public schools, a state government has just imposed a unit excise tax equal to $4 for each monthly unit of wireless phone services sold by each company operating in the state. The following diagram depicts the positions of the demand and supply curves for wireless phone services before the unit excise tax was imposed. Use this diagram to determine the position of the new market supply curve now that the tax hike has gone into effect. Does imposing the $4 per-month unit excise tax cause the market price of wireless phone services to rise by $4 per month? Why or why not? What position of the $4 per - month unit excise tax is paid by consumers? What position is paid by providers of wireless phone services? Concept introduction: Market supply curve: A curve which gives the positive relationship between products supplied in the market and its price is called as market supply curve. It is an upward curve. There is a direct relationship between the price of the product and its supply. Hence, when the price of the product increases, its supply will also increase. Excise tax: A tax paid while purchasing a good or a product is called the excise tax. Mostly this tax is included in the cost of the product.

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Chapter 6, Problem 8P

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To raise funds aimed at providing more support for public schools, a state government has just imposed a unit excise tax equal to $4 for each monthly unit of wireless phone services sold by each company operating in the state. The following diagram depicts the positions of the demand and supply curves for wireless phone services before the unit excise tax was imposed. Use this diagram to determine the position of the new market supply curve now that the tax hike has gone into effect.

Does imposing the $4 per-month unit excise tax cause the market price of wireless phone services to rise by $4 per month? Why or why not?

What position of the $4 per - month unit excise tax is paid by consumers? What position is paid by providers of wireless phone services?

Concept introduction:

Market supply curve: A curve which gives the positive relationship between products supplied in the market and its price is called as market supply curve. It is an upward curve. There is a direct relationship between the price of the product and its supply. Hence, when the price of the product increases, its supply will also increase.

Excise tax: A tax paid while purchasing a good or a product is called the excise tax. Mostly this tax is included in the cost of the product.

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