Question

XYZ, Inc. is a seller of the good. XYZ sells a unit of the good to a buyer and then pays the tax on that unit to the government. XYZ is left with how much money

Answer 1

Answer: $2

Explanation:

The Supply curve S1 represents the supply before tax. The equilibrium price at this point is therefore $3.

With taxes, the supply curve is S2 and the equilibrium price has now gone up to $5.

The amount that XYZ will be left with after paying the tax is:

= Price after tax - price before tax

= 5 - 3

= $2