Figure 8-4
The vertical distance between points A and B represents a tax in the market.

-Refer to Figure 8-4.The tax results in a loss of consumer surplus that amounts to
A) $120.
B) $340.
C) $450.
D) $510.

Question

Figure 8-4
The vertical distance between points A and B represents a tax in the market.
 
-Refer to Figure 8-4.The tax results in a loss of consumer surplus that amounts to
A) $120. 
B) $340. 
C) $450. 
D) $510.

Quizplus · Accepted Answer

The area of the triangle between the original demand curve and the new demand curve after the tax (representing the loss of consumer surplus) is ½($20-$10) x 20 = $100. Additionally, the rectangle between the new demand curve and the supply curve (representing the deadweight loss) is $240 (20 x ($14-$10)). Therefore, the total loss due to the tax is $100 + $240 = $340.

Figure 8-4 the Vertical Distance Between Points a and B Represents a Represents