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 do 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 accompanying table.
Price of imported truck | Quantity of imported trucks (thousands) | |
---|---|---|
Quantity demanded | Quantity supplied | |
$32,000 | 100 | 400 |
$31,000 | 200 | 350 |
$30,000 | 300 | 300 |
$29,000 | 400 | 250 |
$28,000 | 500 | 200 |
$27,000 | 600 | 150 |
a. In the absence of government interference, what is the equilibrium price of an imported truck? The equilibrium quantity? (Do not include decimals in your answers.)
Equilibrium price: $ dlxue+MDBy5K/0u22e1gw+ERNzSqK0Oo
Equilibrium quantity: Y2x7Rp8uOjs= thousand
b. Assume that the government imposes an excise tax of $3,000 per imported truck.
How many imported trucks are now purchased? ygJZKffxRWs= thousand
What is the price? $ TJjIFN8YccjW0id+HnkpxJ4SAjNSdaoR
How much does the foreign automaker receive per truck? $ ZWawoQG9HYvBfJcKsC88RYD38r6ma61Y
c. Calculate the government revenue raised by the excise tax in part b.
Government revenue: $ tNyVlMsMQLoYmWeFHnxT6Q== million