Figure 8-5

-Refer to Figure 8-5.What happens to producer surplus when a tax is imposed in this market?
A)It falls by $600.
B)It falls by $900.
C)It falls by $1,800.
D)It falls by $2,100.

Question

Figure 8-5
 
-Refer to Figure 8-5.What happens to producer surplus when a tax is imposed in this market?
A)It falls by $600. 
B)It falls by $900. 
C)It falls by $1,800. 
D)It falls by $2,100.

Quizplus · Accepted Answer

When a tax is imposed, the supply curve shifts upward, resulting in a decrease in the consumer surplus and the producer surplus. Here, the producer surplus falls by the amount of the tax, which is $1,800 ($3.00 x 600 units). Therefore, the correct answer is (C) - it falls by $1,800.

Figure 8-5 -Refer to Figure 8-5.What Happens to Producer Surplus When a Producer