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Consider the market for a popular caffeinated energy drink among teens in a midsized southern town. After much lobbying from the Mothers of Teens (MOT)
Consider the market for a popular caffeinated energy drink among teens in a midsized southern town. After much lobbying from the Mothers of Teens (MOT) non-prot group. the local government implements a 50cent tax on the sellers of the caffeinated energy drink. As a result, the price that buyers pay increases by 40 cents, and The actual burden of the tax is 10 cents on buyers of caffeinated energy drink and 40 cents on sellers of caffeinated drinks. the actual burden of tax cannot be determined without the before-tax equilibrium price. the actual burden of the tax is 40 cents on buyers of caffeinated energy drink and 10 cents on sellers of caffeinated drinks. buyers and up paying the tax for caffeinated energy drinks. Refer to the graph below showing the Market for Flashlights. 12 - Supply 10 + 8 . 4 - 2 Demand 20 40 60 80 100 Consider that the market for flashlights is described by the graph above and the market is currently in equilibrium. If the government imposes a price floor of $8, then O the market is inefficient at the last flashlight sold because the marginal benefit is less than the marginal cost of that last flashlight. the price buyers are willing to pay for the last unit sold is $8. the market is inefficient at the last flashlight sold because there is a surplus of flashlights in the market. O the price sellers are willing to accept for the last unit sold is $8
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