Use the following to answer question:
-(Figure: The Market for Hamburgers)Use Figure: The Market for Hamburgers.If the market is originally in equilibrium and the government imposes an excise tax of $0.80 per unit of the good sold,consumer surplus will be reduced by:

Question

Use the following to answer question: 
-(Figure: The Market for Hamburgers)Use Figure: The Market for Hamburgers.If the market is originally in equilibrium and the government imposes an excise tax of $0.80 per unit of the good sold,consumer surplus will be reduced by:

Quizplus · Accepted Answer

The correct answer is A because the excise tax of $0.80 per unit of the good sold will reduce consumer surplus by the area of the triangle formed by the demand curve, the equilibrium price, and the new equilibrium price after the tax. This area is calculated as 0.5 * (0.80) * (150) = $60. Since the tax is imposed on both buyers and sellers, consumer surplus will be reduced by twice this amount, or $120.

Use the Following to Answer Question