The graphs show the market for bags of potato chips, which is currently at an equilibrium price of $1.33 per bag and an equilibrium quantity of 5.33 million bags. Suppose that, in an attempt to lower blood pressure and reduce healthcare costs, the government imposes a $1.00 excise (or commodity) tax on potato chips. Suppose the government levies this tax on manufacturers for each bag of potato chips they produce. Please shift the appropriate curve or curves to illustrate this. Price ($ per bag) 5.0 4.5 4.0 3.5 3.0 2.0 What is the price paid per bag by consumers (Pc) with this new tax? What is the price received net of tax (Pp) per bag by producers with this new tax? 2.5 Supply 1.5 1.0 0.5 0.0 0 1 2 3 4 P₁ = $ P₁ = $ 5 Demand 6 7 8 9 10 Quantity (millions of bags)

The graphs show the market for bags of potato chips, which is currently at an equilibrium price of $1.33 per bag and an equilibrium quantity of 5.33 million bags. Suppose that, in an attempt to lower blood pressure and reduce healthcare costs, the government imposes a $1.00 excise (or commodity) tax on potato chips. Suppose the government levies this tax on manufacturers for each bag of potato chips they produce. Please shift the appropriate curve or curves to illustrate this. Price ($ per bag) 5.0 4.5 4.0 3.5 3.0 2.0 What is the price paid per bag by consumers (Pc) with this new tax? What is the price received net of tax (Pp) per bag by producers with this new tax? 2.5 Supply 1.5 1.0 0.5 0.0 0 1 2 3 4 P₁ = $ P₁ = $ 5 Demand 6 7 8 9 10 Quantity (millions of bags)

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter4: Markets In Action

Section: Chapter Questions

Problem 1SQP

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In a market where the supply curve is perfectly inelastic how does an excise tax affect the price paid by consumers and the quantity bought and sold?
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