Figure 8-5

-Refer to Figure 8-5.If the tax is imposed in this market,what would consumer surplus be
A)$600
B)$900
C)$1800
D)$2200

Question

Figure 8-5
 
-Refer to Figure 8-5.If the tax is imposed in this market,what would consumer surplus be
A)$600 
B)$900 
C)$1800 
D)$2200

Quizplus · Accepted Answer

Consumer surplus is the area above the equilibrium price and below the demand curve. In the absence of tax, the consumer surplus is the triangle formed by points A, B, and C. However, with the imposition of tax, the price increases from $8 to $10. The new consumer surplus is the triangle formed by points A, E, and C. The height of this triangle is $18 ($26 - $8) and the base is 50. Therefore, the consumer surplus is 1/2 x 18 x 50 = $450. Since there are 2 consumers, the total consumer surplus is $900 (2 x $450). Therefore, the correct answer is B.

Figure 8-5 -Refer to Figure 8-5.If the Tax Is Imposed in This