What is the amount of the tax per unit

Reference no: EM13684642

The handgun sells in a specialized market, so we'll assume there are sufficient buyers and sellers so that the supply curve and demand curve are smooth, straight lines. The vertical intercept for the demand curve is at 560 and the vertical intercept for the supply curve is at -40 (note that this is NEGATIVE 40). Initially there is no tax, and the gun sells for $80, with 40 units sold.

The government, concerned about how many people own and produce guns, puts a hefty tax on the market in some amount that makes the price paid with buyers rise to $320 and the price received with sellers fall to $20. With the tax, only 20 guns are sold.

What is the amount of the tax per unit (per gun sold)?

Reference no: EM13684642

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