Suppose that your town decides to impose a tax on 2-liter bottles of soda to encourage healthier dietary habits. Before the tax, the supply and demand schedules for bottles of soda are given in the table below.
a. Draw a supply-and-demand graph illustrating the market before the tax. What is the equilibrium price and quantity for bottles of soda?
b. The town then imposes a tax of $0.20 per bottle. Illustrate this on your graph. What is the new equilibrium price and quantity for bottles of soda?
c. How much in taxes will the local government collect?