Question: Widgets are produced by a competitive industry and sold for $5 apiece. The government requires each widget firm to have a license, and charges the

Widgets are produced by a competitive industry and sold for $5 apiece. The government requires each widget firm to have a license, and charges the highest license fee firms are willing to pay. If the government were to impose an excise tax of $3 per widget, how much would the license fee have to change? (Illustrate your answer as an area on a graph). Would total government revenue (i.e., excise tax revenue plus revenue from license fees) rise or fall as a result of the excise tax?

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