Figure 8-1
-Refer to Figure 8-1. Suppose the government imposes a tax of P'-P'''. The area measured by K + L represents
A)tax revenue.
B)consumer surplus before the tax.
C)producer surplus after the tax.
D)total surplus before the tax.

Question

Figure 8-1 
-Refer to Figure 8-1. Suppose the government imposes a tax of P'-P'''. The area measured by K + L represents
A)tax revenue. 
B)consumer surplus before the tax. 
C)producer surplus after the tax. 
D)total surplus before the tax.

Quizplus · Accepted Answer

The area measured by K + L represents the tax revenue, as it is the area between the new price paid by consumers (P') and the price received by producers (P''') after the tax is imposed, multiplied by the quantity sold.

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