Suppose a small city has a kimchi factory on its outskirts. The local government decides to impose a tax on kimchi. Pressreleases focus on reducing the fermented cabbage smell during the workweek, but unnamed sources within the government alsocite additional revenue as a possible reason for the tax.The accompanying diagram shows the market for kimchi in this city. Show the tax revenues (TR) associated with a $2, $4, and$8 per jar tax on kimchi.Price of kimchi ($ per jar)10987801032100123675Quantity of kimchi (millions of jars)Which tax level generates the most revenue?800SupplyDemandThe $2 per jar tax generates the most revenue.The $8 per jar tax generates the most revenue.The $4 per jar tax generates the most revenue.9 10TR ($2/jar)TR ($4/jar)TR ($8/jar)

Demand measures the willingness and the ability of the individual to pay for the commodity. The…

Answered: Which tax level generates the most…

Which tax level generates the most revenue? The $2 per jar tax generates the most revenue. The $8 per jar tax generates the most revenue. The $4 per jar tax generates the most revenue.

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter4: Supply And Demand: An Initial Look

Section: Chapter Questions

Problem 4DQ

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Question

Suppose a small city has a kimchi factory on its outskirts. The local government decides to impose a tax on kimchi. Press
releases focus on reducing the fermented cabbage smell during the workweek, but unnamed sources within the government also
cite additional revenue as a possible reason for the tax.
The accompanying diagram shows the market for kimchi in this city. Show the tax revenues (TR) associated with a $2, $4, and
$8 per jar tax on kimchi.
Price of kimchi ($ per jar)
10
9
8
7
80
10
3
2
1
0
0
1
2
3
6
7
5
Quantity of kimchi (millions of jars)
Which tax level generates the most revenue?
8
00
Supply
Demand
The $2 per jar tax generates the most revenue.
The $8 per jar tax generates the most revenue.
The $4 per jar tax generates the most revenue.
9 10
TR ($2/jar)
TR ($4/jar)
TR ($8/jar)

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