Figure 8-5

-Refer to Figure 8-5.What happens to total surplus in this market when a tax is imposed?
A)It increases by $1,500.
B)It increases by $3,000.
C)It decreases by $1,500.
D)It decreases by $,3000.

Question

Figure 8-5
 
-Refer to Figure 8-5.What happens to total surplus in this market when a tax is imposed?
A)It increases by $1,500. 
B)It increases by $3,000. 
C)It decreases by $1,500. 
D)It decreases by $,3000.

Quizplus · Accepted Answer

When a tax is imposed on this market, the equilibrium quantity decreases from 20 to 15. As a result, consumer surplus decreases by $1,500 (the shaded area A), producer surplus decreases by $1,500 (the shaded area B), and the government collects tax revenue of $1,500 (the rectangle labeled "Tax Revenue"). Therefore, total surplus decreases by $1,500.

Figure 8-5 -Refer to Figure 8-5.What Happens to Total Surplus in This