Scenario 12-3
Suppose Roger and Regina receive great satisfaction from their consumption of cheesecake. Regina would be willing to purchase only one slice and would pay up to $8 for it. Roger would be willing to pay $11 for his first slice, $9 for his second slice, and $5 for his third slice. The current market price is $5 per slice.
-Refer to Scenario 12-3. Assume that the government places a $4 tax on each slice of cheesecake and that the new equilibrium price is $9. How much tax revenue will be generated from sales to Regina and Roger?
A)zero
B)$4
C)$8
D)$12

Question

Quizplus · Accepted Answer

With the $4 tax, the new price of each slice of cheesecake is $9. Regina is willing to pay up to $8 for one slice, so she will not purchase any at the new price of $9. Therefore, there will be zero tax revenue generated from Regina. Roger, however, is still willing to purchase three slices. He will pay $11 for the first slice (+$4 tax), $9 for the second slice (+$4 tax), and $5 for the third slice (+$4 tax). The total tax revenue generated from sales to Roger is $4 per slice x 3 slices = $12. Therefore, the correct answer is C.

Scenario 12-3 Suppose Roger and Regina Receive Great Satisfaction from Their Consumption