Assume that a $0.25/gallon tax on milk causes a loss of $250 million in consumer and producer surplus and creates a deadweight loss of $45 million.From this information,we know that the tax revenue from the tax is

Question

Quizplus · Accepted Answer

The total loss in surplus ($250 million) is the sum of the loss in consumer surplus and producer surplus. The deadweight loss is separate from this total loss. Therefore, the tax revenue from the tax is:

Tax revenue = Total loss in surplus - Deadweight loss
Tax revenue = $250 million - $45 million
Tax revenue = $205 million

Therefore, the answer is C, $205 million.

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