Figure 8-4
The vertical distance between points A and B represents a tax in the market.
-Refer to Figure 8-4.The amount of deadweight loss as a result of the tax is
A)$35.00.
B)$45.25.
C)$52.50.
D)$105.00.

Question

Figure 8-4
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-4.The amount of deadweight loss as a result of the tax is
A)$35.00. 
B)$45.25. 
C)$52.50. 
D)$105.00.

Quizplus · Accepted Answer

Deadweight loss is represented by the area of the triangle between the supply and demand curves, from the equilibrium point to the quantity demanded and supplied at the taxed price. In this case, the deadweight loss is equal to the area of the triangle with a base of 15 units (the difference in quantity demanded and supplied at the taxed price) and a height of $3.50 (the tax per unit). Therefore, the deadweight loss is 0.5 x 15 x $3.50 = $52.50.

Figure 8-4 the Vertical Distance Between Points a and B Represents a Represents