The graph above shows the market for a product where S₁ is the original supply curve and S₂ is the new supply curve following a tax on producers to reduce pollution.The tax per unit of output is: A) AB. B) AC. C) BG. D) AJ.

Question

Quizplus · Accepted Answer

The tax causes the supply curve to shift upwards by the amount of the tax per unit of output. The distance between the original supply curve (S₁) and the new supply curve (S₂) at the equilibrium quantity reflects the amount of the tax, and this distance is equal to the vertical distance between points A and C. Therefore, the tax per unit of output is equal to AC.

The Graph Above Shows the Market for a Product Where