Figure 4-15 Figure 4-15 shows the market for beer. The government plans to impose a unit tax in this market.
-Refer to Figure 4-15. As a result of the tax, is there a loss in consumer surplus?

Question

Figure 4-15  Figure 4-15 shows the market for beer. The government plans to impose a unit tax in this market.
-Refer to Figure 4-15. As a result of the tax, is there a loss in consumer surplus?

Quizplus · Accepted Answer

Imposing a unit tax will increase the price of beer for consumers, leading to a decrease in the quantity of beer demanded. This results in a loss in consumer surplus as consumers are paying a price above the economically efficient price. The producer will pass on some of the tax burden to the consumers, resulting in a market with a new equilibrium at a higher price and lower quantity than before. However, the loss in consumer surplus still exists. Therefore, the correct choice is A.

Figure 4-15 Figure 4-15 Shows the Market for Beer