Assume the government imposes a $0.75 excise tax on the sale of every 2 liter bottle of
Question:
Assume the government imposes a $0.75 excise tax on the sale of every 2 liter bottle of soda. The tax is to be paid by the producers of soda. The figure below shows the annual market for 2-liter bottles of soda before and after the tax is imposed.
Instructions: Round your answers for the price to two decimal places. Enter your answers for quantity as a whole number.
a. Before the tax is imposed, the equilibrium price is $___ per bottle and the equilibrium quantity is ___ billion bottles.
b. After the excise tax is imposed, consumers pay a price of $___ per bottle.
c. After the excise tax is imposed, the price (or amount) producers keep after the tax is paid is $___ per bottle.
d. After the tax is imposed, the equilibrium quantity is ___ billion bottles.
e. The government is able to collect $___ billion of tax revenue from the tax.
Expert Answer:
