In the market for widgets,the supply curve is the typical upward-sloping straight line,and the demand curve is the typical downward-sloping straight line.The equilibrium quantity in the market for widgets is 200 per month when there is no tax.Then a tax of $5 per widget is imposed.As a result,the government is able to raise $800 per month in tax revenue.We can conclude that the equilibrium quantity of widgets has fallen by
A)40 per month.
B)50 per month.
C)75 per month.
D)100 per month.

Question

Quizplus · Accepted Answer

The tax of $5 per widget will shift the supply curve upward by $5, which will lead to a decrease in the equilibrium quantity. The new equilibrium quantity will be where the new supply curve intersects the demand curve, which is at a quantity of 160 per month. Therefore, the equilibrium quantity has fallen by 40 per month.

In the Market for Widgets,the Supply Curve Is the Typical