Figure 8-6

-Refer to Figure 8-6.What would consumer surplus be after the tax is levied on the seller
A)$45
B)$75
C)$125
D)$150

Question

Figure 8-6
 
-Refer to Figure 8-6.What would consumer surplus be after the tax is levied on the seller
A)$45 
B)$75 
C)$125 
D)$150

Quizplus · Accepted Answer

Consumer surplus is the difference between the maximum amount a consumer is willing to pay for a product and the actual price paid. Before the tax is levied, consumer surplus can be calculated by finding the area of the triangle above the equilibrium price and below the demand curve. This is shown as Area A in the graph.

After the tax is levied on the seller, the supply curve shifts up by the amount of the tax. The new equilibrium price is higher and the quantity purchased is lower. The consumer surplus now can be calculated as the area above the new equilibrium price and below the demand curve. This is shown as Area B in the graph.

The decrease in consumer surplus due to the tax is equal to the difference between Area A and Area B. Using the dimensions given in the graph, we can calculate this difference as $45. Therefore, the consumer surplus after the tax is levied on the seller is $45.

Figure 8-6 -Refer to Figure 8-6.What Would Consumer Surplus Be After the Surplus