Suppose that the unit tax imposed by the government is Rs 50. Then, if the firm produces and sells 100 units of the good, the total tax that the firm must pay to the government is _____.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs. 5000.
A unit tax (also called specific tax) means a fixed amount of tax per unit of output.
Given:
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Unit tax = Rs 50 per unit
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Quantity produced = 100 units
Total tax = Unit tax × Quantity
=50×100=5000