The supply curve for whiskey is the typical upward-sloping straight line,and the demand curve for whiskey is the typical downward-sloping straight line.When whiskey is taxed,the area on the relevant supply-and-demand graph that represents
A)government's tax revenue is a rectangle.
B)the deadweight loss of the tax is a triangle.
C)the loss of consumer surplus caused by the tax is neither a rectangle nor a triangle.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

The government's tax revenue is represented by a rectangle between the supply and demand curves at the quantity sold after the tax. The deadweight loss is a triangle that represents the lost welfare due to reduced transactions. The loss of consumer surplus is typically a combination of a rectangle and a triangle, but the statement in C is incorrect as it suggests it is neither. Therefore, all statements are correct in their respective contexts.

The Supply Curve for Whiskey Is the Typical Upward-Sloping Straight