The figure below is the graph of the demand function D, the supply function S, and the supply function after a $30 tax T for the same product. Is it possible for the government to earn no money if it keeps increasing taxes on this product?
A)Yes
B)No

Question

The figure below is the graph of the demand function D, the supply function S, and the supply function after a $30 tax T for the same product. Is it possible for the government to earn no money if it keeps increasing taxes on this product? ​ 
A)Yes 
B)No

Quizplus · Accepted Answer

Based on the graph, if the government keeps increasing taxes on the product, the supply will decrease while the demand stays relatively constant. At a certain point, the tax will increase so much that the quantity supplied will be zero, which means the tax revenue will also be zero. Therefore, it is possible for the government to earn no money if it keeps increasing taxes on this product.

The Figure Below Is the Graph of the Demand Function