The market for a mineral product is modelled by the following Demand and Supply Curves: Demand: Q D = 6 0 – 2 P Supply:

Published by admin at August 12, 2023

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Supply: Q S = 3 P – 2 0

Where Q is Quantity measured in tons, and P is the Price in $ per ton.

The Government decides to levy an In direct Tax (an excise) of $2 per ton on producers.

The competitive model predicts that, as a result of the tax, the equilibrium price will rise by

A. $0.40 per ton

B. $1.20 per ton

C. $1.50 per ton

D. $2.00 per ton

Explain your answer.