The following figure shows the demand and supply in a market, and the supply when there government decides to impose a specific tax and collect it from the producers. What ad-valorem tax (% collected from the producers revenue) would generate the same revenue for the government?
It won't let me post picture. But here is an explanation of graph. In a two-axis graph we measure quantity q in the horizontal axis and dollars $ in the vertical axis. We show three curves: one is labeled S, another S+t, and a third one Q; curve S follows the vertical axis until a positive value, then it is strictly increasing; that is, a higher price has a higher associated quantity; for price $8, S associates a positive value q*; curve S+t is the vertical translation of curve S by value t=2; in particular for price $10, curve S+t associates value q*; finally Q is a decreasing curve; for q=0 it starts from a value that is higher than 10 and decreases in all of its range; Q intersects S+t at p=$10 and q=q*