A consumer values a car at $30,000 and a producer values the same car at $20,000.If the transaction is completed at $24,000,the transaction will not take place if:

Question

Quizplus · Accepted Answer

The total surplus in this transaction is $6,000 ($30,000 - $24,000 for the consumer and $24,000 - $20,000 for the producer). If the tax is larger than the total surplus, it will create a deadweight loss as the transaction will not be completed. Therefore, option C is correct. A and D do not necessarily lead to a failed transaction, and option B does not provide enough information about the tax size in relation to the total surplus.

A Consumer Values a Car at $30,000 and a Producer