FIGURE 18-3
-Refer to Figure 18-3.Suppose that supply is perfectly elastic and the price of this good is initially P₁.If an excise tax raises the price from P₁ to P₂,the excess burden of the tax is area

Question

FIGURE 18-3 -Refer to Figure 18-3.Suppose that supply is perfectly elastic and the price of this good is initially P<sub>1</sub>.If an excise tax raises the price from P<sub>1</sub> to P<sub>2</sub>,the excess burden of the tax is area A) P<sub>3</sub>AP<sub>4</sub>. B) P<sub>2</sub>BP<sub>3</sub>. C) P<sub>1</sub>CBP<sub>2</sub>. D) BFC. E) P<sub>1</sub>FBP<sub>2</sub>.

Quizplus · Accepted Answer

The excess burden of a tax, also known as the deadweight loss, is represented by the area of the triangle formed between the supply and demand curves after the tax is imposed. In this case, it is the area BFC.

FIGURE 18-3 -Refer to Figure 18-3.Suppose That Supply Is Perfectly Elastic and Elastic