Chapter 50, Problem 7MCQ

To determine

The height when an excise tax drives a wedge between the supply price and the demand price.

Explanation of Solution

An excise tax drives a wedge between the supply price and the demand price with a height equal to the amount of tax per unit of the good because when the supply curve shifts, the vertical distance between the two curves is just equal to the amount of tax.

Therefore, the correct option is b.

Economics Concept Introduction

Introduction:

A tax that is levied on sale of certain goods by the government is called excise tax.