The U.S. government would like to help the American auto industry compete against foreign automakers that sell trucks in the United States. It can have this by imposing an excise tax on each foreign truck sold in the United States. The hypothetical pre-tax demand and supply schedules for imported trucks are given in the following table.

Price Quantity Demanded Quantity Supplied

34000 100 400

33000 200 350

32000 300 300

31000 400 250

30000 500 200

29000 600 150

Question 1: Without the tax, the equilibrium price of an imported truck is $_______.The equilibrium quantity is _______.

A. 33000 350

B. 32000 300

C. 31000 250

D. 30000 200

Assume that the government imposes an excise tax of $3,000 per imported truck and the tax is levied on the foreign producers.Fill in the blanks in the table below and Illustrate the effect of this excise tax in your diagram above. (Same Chart)

Price Quantity Demanded Quantity Supplied P-T Quantity Supllied

34000 100 400

33000 200 350

32000 300 300

31000 400 250

30000 500 200

29000 600 150

Question 2: At the price of $32,000 shown in the Price column the post-tax quantity demanded is ______ and post-tax quantity supply is _______.

A. 400 300

B. 400 250

C. 300 200

D. 300 150

Question 3: The after tax price paid by buyers of foreign trucks is $ ______ and the price received by the producers is $______.

A. 35000 32000

B. 34000 31000

C. 33000 30000

D. 32000 29000

Question 4: The quantity of imported trucks now purchased is ______.

A. 50

B. 100

C. 150

D. 200

Question 5: The government revenue raised by the excise tax is _______.

A. 600000

B. 900000

C. 300000

Question 6: As a result of tax on foreign trucks, which one the following is the most likely outcome in the market for trucks made by domestic manufacturers?

A. The price of domestic trucks will decrease and quantity sold will increase.

B. The price of domestic trucks and quantity sold will both increase.

C. The price of domestic trucks and quantity sold will both decrease.

D. The price of domestic trucks will increase and the quantity sold will decrease.

Question 7: Given the change in the demand price from the pre-tax level (the answer to question 1) to the post-tax level (the answer to question 3), compute the coefficient of price elasticity of demand for this price change using the midpoint formula.The price elasticity of demand for imported trucks is,

A. 0.08 Demand for imported trucks is very inelastic.

B. 0.08 Demand for imported trucks is very elastic.

C. 13 Demand for imported trucks is very inelastic.

D. 13 Demand for imported trucks is very elastic.

Question 8: The tax incidence on buyers of imported trucks is _______ and on foreign manufacturers of trucks is _______.

A. 3000 500

B. 2000 1000

C. 1000 2000

D. 500 3000

Question 9: The deadweight loss resulting from the tax is

A. 150,000

B. 200,000

C. 300,000

D. 400,000