Question

2 of 8 Questions < Assignment Score: 500/800 Resources Hint Chekanowe Check Answer Media 100/100 < Question 2 of 8 > Participation Credit Taxes Work it Out: Question 2 of 4 0/100 2 Question O of Attempts Price of imported truck Quantity demanded of imported trucks (thousands) The U.S. government would like to help the American auto industry compete against foreign automakers that sell trucks in the United States. It can do this by imposing an excise tax on each foreign truck sold in the United States. The hypothetical pre-tax demand and supply schedules for imported trucks are given in the accompanying table. Quantity supplied of imported trucks (thousands) 3 Media 100/100 Participation Credit $32,000 100 400 4 Media 100/100 Participation Credit 31,000 200 350 300 300 5 Question 3 of me Attempts Assume that the government imposes an excise tax of $3,000 per imported truck. How many imported trucks are now purchased? 100/100 Correct 400 30,000 29,000 28,000 27,000 500 250 200 150 0/100 6 Question O of Attempts 600 purchased: thousands 0/100 7 Question O of Attempts What is the price? 8 Media 100/100 Participation Credit price: $ How much does the foreign automaker receive per truck? thousand

Answer 1

This tax will increase the price of imported trucks by $3000 at every quantity supplied. This means when 400 trucks are now supplied the price of each truck will be $35000. The new equilibrium is determined at 200 trucks. The price at the equilibrium is $31000 because only at this price the quantity demanded and the quantity supplied are now equal.

Total number of trucks = 200 thousand

Price of the truck = 31,000

Price received by foreign automaker = 28000 after tax.