Figure 8-1
-Refer to Figure 8-1. Suppose the government imposes a tax of P'-P'''. Total surplus before the tax is measured by the area
A)I + Y.
B)J + K + L + M.
C)L + M + Y.
D)I + J + K + L + M + Y.

Question

Figure 8-1 
-Refer to Figure 8-1. Suppose the government imposes a tax of P'-P'''. Total surplus before the tax is measured by the area
A)I + Y. 
B)J + K + L + M. 
C)L + M + Y. 
D)I + J + K + L + M + Y.

Quizplus · Accepted Answer

Total surplus before the tax includes consumer surplus (I + J + K), producer surplus (L + M), and the government's tax revenue (which is zero before the tax), making the total surplus I + J + K + L + M + Y.

Figure 8-1 -Refer to Figure 8-1. Suppose the Government Imposes a Tax