Use the figure below to answer the following question(s).
Figure 4-9

Refer to Figure 4-9. The market for gasoline was initially in equilibrium at point b and a $.40 excise tax is illustrated. What does the triangular area abc represent?
A) the revenue the government derives from the tax
B) the tax paid by consumers
C) the tax paid by producers
D) the deadweight loss (or excess burden) created by the tax

Question

Use the figure below to answer the following question(s).
Figure 4-9

Refer to Figure 4-9. The market for gasoline was initially in equilibrium at point b and a $.40 excise tax is illustrated. What does the triangular area abc represent?
A) the revenue the government derives from the tax 
B) the tax paid by consumers 
C) the tax paid by producers 
D) the deadweight loss (or excess burden) created by the tax

Quizplus · Accepted Answer

The triangular area abc represents the deadweight loss (or excess burden) created by the tax. This is the loss of efficiency in the market due to the tax, which results in less gasoline being consumed and produced than would be the case in the absence of the tax. The revenue the government derives from the tax is represented by the rectangle labeled "government revenue," while the tax paid by consumers and producers is reflected in the shift of the demand and supply curves to the left.

Use the Figure Below to Answer the Following Question(s)