Figure 8-9
The vertical distance between points A and C represents a tax in the market.
-Refer to Figure 8-9.The imposition of the tax causes the quantity sold to
A)increase by 20 units.
B)increase by 500 units.
C)decrease by 20 units.
D)decrease by 500 units.

Question

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9.The imposition of the tax causes the quantity sold to
A)increase by 20 units. 
B)increase by 500 units. 
C)decrease by 20 units. 
D)decrease by 500 units.

Quizplus · Accepted Answer

The imposition of a tax typically leads to a decrease in quantity sold as it increases the price paid by consumers and reduces the price received by producers. In this case, the tax increases the price from P1 to P2, leading to a decrease in quantity from Q1 to Q2. The vertical distance between A and C represents the tax amount. Therefore, the quantity sold decreases by 20 units (Q1-Q2=20). Choice C is correct.

Figure 8-9 the Vertical Distance Between Points a and C Represents a Represents