Exhibit 7-11
-Refer to Exhibit 7-11. If the government establishes a tax of $4 per bushel of wheat, the deadweight loss that results is represented by area
A)D.
B)A.
C)C.
D)F.
E)B.

Question

Exhibit 7-11 
-Refer to Exhibit 7-11. If the government establishes a tax of $4 per bushel of wheat, the deadweight loss that results is represented by area
A)D. 
B)A. 
C)C. 
D)F. 
E)B.

Quizplus · Accepted Answer

Deadweight loss from a tax is represented by the area of lost consumer and producer surplus that is not transferred to the government or anyone else. In this case, without seeing Exhibit 7-11, the correct answer typically involves identifying the area that represents the economic transactions that no longer occur due to the tax. Area B is a common representation of this concept in graphical analyses of taxes on supply and demand diagrams.

Exhibit 7-11 -Refer to Exhibit 7-11. If the Government Establishes a Tax