Chapter 7, Problem 2P

To determine

To Calculate:

1. The post-tax price of cars, the price received by the producers and the tax revenue of the government.
2. After deduction of tax from $6,000 to $4,500 per car the price paid by the consumers, the price received by the producers and the tax revenue.
3. The comparison of the tax revenue of (a) and (b). What caused the change in tax revenue due to reduction in excise tax?

Concept Introduction:

Excise Tax:

An indirect tax imposed on the sale of goods and services.