To raise funds aimed at providing more support for public schools, a state government has just imposed a unit excise tax equal to $4 for each monthly unit of cell services sold by each company operating in the state. The following diagram depicts the positions of the demand and supply curves for cell services before the unit excise tax was imposed. Use this diagram to determine the position of the new market supply curve now that the tax hike has gone into effect. a. Does imposing the $4-per-month unit excise tax cause the market price of cell services to rise by $4 per month? Why or why not? b. What portion of the $4-per-month unit excise tax is paid by consumers? What portion is paid by providers of cell services?
To raise funds aimed at providing more support for public schools, a state government has just imposed a unit excise tax equal to $4 for each monthly unit of cell services sold by each company operating in the state. The following diagram depicts the positions of the demand and supply curves for cell services before the unit excise tax was imposed. Use this diagram to determine the position of the new market supply curve now that the tax hike has gone into effect.
a. Does imposing the $4-per-month unit excise tax cause the market price of cell services to rise by $4 per month? Why or why not?
b. What portion of the $4-per-month unit excise tax is paid by consumers? What portion is paid by providers of cell services?
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