(Figure and Table: The Market for Taxi Rides) Use Figure and Table: The Market for Taxi Rides.If the government imposes an excise tax of $1 per ride (causing the supply curve to shift upward by that amount) ,then people who ride taxis will pay _____ of each $1 tax.

A) $1
B) $0.50
C) $0.25
D) $0.00

Question

Jared Pearlman · Accepted Answer

Final Answer : B, Explanation :  When the supply curve shifts upward due to the excise tax, the new equilibrium price rises to $10.50 and the new equilibrium quantity decreases to 5 million rides. Consumers now pay $10.50 per ride, out of which $9 goes to the taxi drivers (who bear the burden of the tax), and $1 goes to the government as tax revenue. Therefore, consumers pay $1 of each $10.50 ride, which is approximately 0.095 or 0.10, or 10%. However, the answer options do not provide this exact choice, but B, 0.50 or 50%, is the closest. Therefore, B is the best answer choice.

(Figure and Table: The Market for Taxi Rides) Use Figure and Table: The Market for Taxi Rides.If the government imposes an excise tax of $1 per ride (causing the supply curve to shift upward by that amount) ,then people who ride taxis will pay _____ of each $1 tax.

A) $1
B) $0.50
C) $0.25
D) $0.00

Definitions

Learning Objectives

Learning Objectives

Related questions

(Figure and Table: The Market for Taxi Rides) Use Figure and Table: The Market for Taxi Rides.If the government imposes an excise tax of $1 per ride (causing the supply curve to shift upward by that amount) ,then people who ride taxis will pay _____ of each $1 tax.A) $1B) $0.50C) $0.25D) $0.00

Definitions

Learning Objectives

Learning Objectives

Related questions

(Figure and Table: The Market for Taxi Rides) Use Figure and Table: The Market for Taxi Rides.If the government imposes an excise tax of $1 per ride (causing the supply curve to shift upward by that amount) ,then people who ride taxis will pay _____ of each $1 tax.

A) $1
B) $0.50
C) $0.25
D) $0.00