Figure 8-5

-Refer to Figure 8-5.If the tax is imposed on the buyer,what would total surplus in this market be
A)$1500
B)$3600
C)$4500
D)$6000

Question

Figure 8-5
 
-Refer to Figure 8-5.If the tax is imposed on the buyer,what would total surplus in this market be
A)$1500 
B)$3600 
C)$4500 
D)$6000

Quizplus · Accepted Answer

Total surplus is the sum of consumer surplus and producer surplus. Before the tax, consumer surplus is $4500, producer surplus is $1500, and total surplus is $6000.

After the tax is imposed on buyers, the new equilibrium price is $20 and the quantity exchanged reduces to 150 units. Consumer surplus is now $3000 [(30-20)*150/2], producer surplus is $1500 (same as before), and total surplus is $4500.

Therefore, the best choice is C, which is the new total surplus after the tax.

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