Question

The table below presents the annual market for sofas in Akron, Ohio. Suppose the state government imposes a $200 excise tax on every sofa sold to be paid by customers at the point of sale.

Market for Sofas Price (dollars) $1,240 1,180 ї,120 1,060 1,000 940 880 820 760 700 Quantity of Sofas Demanded 190 220 250 280 310 340 370 400 430 460 Quantity of Sofas Supplied 290 270 250 230 210 190 170 150 130 110 Quantity of Sofas Demanded with Excise Tax 90 120 150 180 210 240 270 300 330 360 a. Before the excise tax is imposed, what are the equilibrium price and quantity of sofas in Akron? $1,000 and 210 sofas $1,180 and 250 sofas $1,120 and 250 sofas $1,200 and 280 sofas b. Including the excise tax, what is the new equilibrium price consumers pay for sofas after the tax is imposed? $1,200 $1,000 $1,120 $%800

Answer 1