CIMA BA1 · Chapter 5 · Question 9 of 10
In the market where Qd = 500 - 5P and Qs = -100 + 5P, the government imposes a specific tax of $8 per unit on suppliers. What will be the government's tax revenue?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) $1,440
Explanation
Suppliers now receive P - 8, so supply becomes Qs = -100 + 5(P - 8) = -140 + 5P. Setting 500 - 5P = -140 + 5P gives 10P = 640, so the consumer price is $64 and quantity = 500 - 5 x 64 = 180 units. Tax revenue = $8 x 180 = $1,440.
More Demand, supply and price determination MCQs
- Q1A movement along a demand curve (rather than a shift of the curve) is caused by:
- Q2Which of the following would shift the demand curve for a normal good to the right?
- Q3Printers and ink cartridges are complementary goods. If the price of printers falls significantly, what is the likely effect in the market…
- Q4In a market, demand is Qd = 500 - 5P and supply is Qs = -100 + 5P, where P is price in $. What are the equilibrium price and quantity?
- Q5If the government imposes an effective maximum price below the equilibrium price, the most likely result is: