The graph shows the demand and supply of bungee jumps in Xtremeland. The government decides to impose an 200 Supply 180 excise tax on bungee jumps to help pay for the high 160 number of back and neck injuries. 140 120- 100- 80 60- 40 Demand 20- 50,000 0 10,000 30,000 70,000 Quantity of bungee jumps What would the government's tax revenue be if it imposes a tax of $80 on each jump? What would the government's tax revenue be if it imposes a tax of $40 on each jump? What would the government's tax revenue be if it imposes a tax of $120 on each jump? Price of bungee jumps (S) What principle of taxation does the graph help demonstrate? the higher the tax rate, the higher the revenue the lower the tax rate, the lower the revenue setting too high a tax rate can reduce tax revenue the higher the tax rate, the lower the deadweight loss

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