Figure 8-1
-Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by I + Y represents the
A)deadweight loss due to the tax.
B)loss in consumer surplus due to the tax.
C)loss in producer surplus due to 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 I + Y represents the
A)deadweight loss due to the tax. 
B)loss in consumer surplus due to the tax. 
C)loss in producer surplus due to the tax. 
D)total surplus before the tax.

Quizplus · Accepted Answer

The area measured by I + Y represents the deadweight loss due to the tax, which is the loss in total surplus that occurs because the tax discourages mutually beneficial trades.

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