Table 12-4

-Refer to Table 12-4.Suppose that the government imposes a $2 tax on delights,causing the price to increase from $4.00 to $6.00.Total consumer surplus
A) falls by less than the tax revenue generated.
B) falls by more than the tax revenue generated.
C) falls by the same amount as the tax revenue generated.
D) will not fall since Jennifer will no longer be in the market.

Question

Table 12-4
 
-Refer to Table 12-4.Suppose that the government imposes a $2 tax on delights,causing the price to increase from $4.00 to $6.00.Total consumer surplus
A) falls by less than the tax revenue generated. 
B) falls by more than the tax revenue generated. 
C) falls by the same amount as the tax revenue generated. 
D) will not fall since Jennifer will no longer be in the market.

Quizplus · Accepted Answer

When the price increases from $4.00 to $6.00 due to the $2 tax on delights, the quantity demanded decreases. This decrease in quantity consumed causes a reduction in consumer surplus, which falls by more than the tax revenue generated. In other words, the decrease in consumer surplus is greater than the increase in government revenue from the tax. Therefore, the total consumer surplus falls by more than the tax revenue generated.

Table 12-4 -Refer to Table 12-4.Suppose That the Government Imposes a $2