Figure 8-2
The vertical distance between points A and B represents a tax in the market.
-Refer to Figure 8-2.The loss of producer surplus for those sellers of the good who continue to sell it after the tax is imposed is
A)$0.
B)$1.
C)$2.
D)$3.

Question

Figure 8-2
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-2.The loss of producer surplus for those sellers of the good who continue to sell it after the tax is imposed is
A)$0. 
B)$1. 
C)$2. 
D)$3.

Quizplus · Accepted Answer

The loss of producer surplus is represented by the area of the trapezoid formed by the points A, B, C, and D (shaded in red). The base of the trapezoid is the quantity of the good sold in the market after the tax is imposed, and the height is the amount of tax per unit. Therefore, the loss of producer surplus is equal to 0.5 x base x height = 0.5 x 4 x 0.5 = $1. However, this trapezoid has two equal sides, so we need to multiply by 2 to get the total loss of producer surplus, which is $2.

Figure 8-2 the Vertical Distance Between Points a and B Represents a Represents