Figure 8-7
The vertical distance between points A and B represents a tax in the market.

-Refer to Figure 8-7.As a result of the tax,buyers effectively pay
A) $16 for each unit of the good, and sellers effectively receive $12 for each unit of the good.
B) $16 for each unit of the good, and sellers effectively receive $8 for each unit of the good.
C) $12 for each unit of the good, and sellers effectively receive $8 for each unit of the good.
D) $14 for each unit of the good, and sellers effectively receive $10 for each unit of the good.

Question

Figure 8-7
The vertical distance between points A and B represents a tax in the market.
 
-Refer to Figure 8-7.As a result of the tax,buyers effectively pay
A) $16 for each unit of the good, and sellers effectively receive $12 for each unit of the good. 
B) $16 for each unit of the good, and sellers effectively receive $8 for each unit of the good. 
C) $12 for each unit of the good, and sellers effectively receive $8 for each unit of the good. 
D) $14 for each unit of the good, and sellers effectively receive $10 for each unit of the good.

Quizplus · Accepted Answer

The tax shifts the supply curve upwards by the amount of the tax ($4), creating a new equilibrium point at the intersection of the new supply curve and the original demand curve. At this point, the price paid by buyers is $16 ($12 for the good plus the $4 tax), and the price received by sellers is $8 ($12 minus the $4 tax). Therefore, buyers effectively pay $16 for each unit of the good, and sellers effectively receive $8 for each unit of the good. This corresponds to choice B.

Figure 8-7 the Vertical Distance Between Points a and B Represents a Represents