The graph shown demonstrates a tax on sellers. Which of the following can be said about the effect of this tax?

Question

Quizplus · Accepted Answer

A tax on sellers shifts the supply curve leftward, which increases the price paid by consumers and decreases the price received by producers. As a result, consumer surplus decreases, while producer surplus decreases, and the tax revenue is collected by the government. This also creates deadweight loss, which represents the loss of social welfare due to the distortion caused by the tax. Therefore, the correct answer is D, as the tax decreases consumer surplus.

The Graph Shown Demonstrates a Tax on Sellers