Asked by Alyssa Nation on Apr 27, 2024

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Refer to Figure 10-6. If the government imposed a corrective tax that successfully moved the market from the market equilibrium to the social optimum, then tax revenue for the government would amount to

A) $2,600.
B) $300.
C) $2,000.
D) $2,300.

Social Optimum

The ideal level of allocation of resources that results in the highest possible economic welfare for society.

Corrective Tax

A tax designed to encourage or discourage certain behaviors by including the cost of externalities, thereby correcting an inefficient market outcome.

Tax Revenue

The income that is gained by governments through taxation, serving as a primary source of financing government expenditures.

  • Evaluate the fiscal implications of corrective taxes and pollution permits for government revenue.
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SG
Sallie GriffinMay 01, 2024
Final Answer :
C
Explanation :
The tax revenue for the government is calculated by multiplying the quantity of goods sold at the social optimum by the per unit tax. The per unit tax is the vertical distance between the supply and demand curves at the social optimum quantity. The graph or figure is not provided, but based on the correct answer, we can infer that the tax revenue calculated (assuming a standard supply and demand model where a corrective tax shifts the supply curve upwards to account for external costs) matches option C, $2,000. This suggests that the tax per unit multiplied by the quantity sold at the social optimum equals $2,000.