-The figure above shows a tax imposed on a good with an external cost. The area of the rectangle abcd equals
A) the MC.
B) the total tax revenue collected by the government.
C) the amount of pollution tax per tonne.
D) the MSB.
E) the deadweight loss.

Question

-The figure above shows a tax imposed on a good with an external cost. The area of the rectangle abcd equals
A) the MC. 
B) the total tax revenue collected by the government. 
C) the amount of pollution tax per tonne. 
D) the MSB. 
E) the deadweight loss.

Quizplus · Accepted Answer

The area of the rectangle abcd represents the total tax revenue collected by the government. This is because the height of the rectangle (the difference between the supply curve before and after the tax) represents the tax per unit, and the width (the quantity of the good) represents the total number of units sold. Multiplying these together gives the total tax revenue.

-The Figure Above Shows a Tax Imposed on a Good