The following figure depicts the market for a certain good and the incidence of a tax on consumers.

-Refer to the figure above.The producer surplus after the tax imposed on consumer is ________.

Question

The following figure depicts the market for a certain good and the incidence of a tax on consumers.
 
-Refer to the figure above.The producer surplus after the tax imposed on consumer is ________.

Quizplus · Accepted Answer

Producer surplus is the area above the supply curve and below the equilibrium price. In the case of a tax on consumers, the supply curve shifts upward by the amount of the tax, and the equilibrium price received by producers decreases. Therefore, producer surplus after the tax is only represented by Region 4 - the area above the new supply curve (S+tax) and below the new equilibrium price. Regions 1, 2, and 3 represent consumer surplus and tax revenue.

The Following Figure Depicts the Market for a Certain Good