Gce Model Questions Vol1 2018 Economics Question 46

Practice objective / multiple choice question 46 from the 2018 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2018 Economics Objective / Multiple Choice Medium Difficulty
Question 46 GCE_MODEL_QUESTIONS_VOL1 • 2018 • ECONOMICS • objective

The government imposes a specific tax \(t\) per unit on a good. The market demand is \(Q_d = 120 - 2P\), where \(P\) is the price paid by consumers. The market supply is \(Q_s = -20 + 4(P - t)\), where producers receive the price net of tax. Determine the value of \(t\) (in monetary units) that maximises the government's tax revenue, and state the maximum revenue.

Answer Options

A. Tax that maximises revenue: \(t = 25\) (monetary units); maximum revenue: \(\frac{2500}{3}\) ≈ \(833.33\).
B. Tax that maximises revenue: \(t = 22.5\) (monetary units); maximum revenue: \(\frac{2025}{3}\) ≈ \(675.00\).
Correct Answer C. Tax that maximises revenue: \(t = 27.5\) (monetary units); maximum revenue: \(\frac{3025}{3}\) ≈ \(1008.33\).
D. Tax that maximises revenue: \(t = 30\) (monetary units); maximum revenue: \(\frac{3600}{3}\) ≈ \(1200.00\).
Correct Answer
C
Correct Option:
Tax that maximises revenue: \(t = 27.5\) (monetary units); maximum revenue: \(\frac{3025}{3}\) ≈ \(1008.33\).

About This Question

This is Gce Model Questions Vol1 2018 Economics Question 46. It is one of the objective questions from the 2018 Gce Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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