Figure 8-5
Suppose that the government imposes a tax of P3 - P1.
-Refer to Figure 8-5.After the tax is levied,consumer surplus is represented by area
A)A.
B)A+B+C.
C)D+H+F.
D)F.

Question

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5.After the tax is levied,consumer surplus is represented by area
A)A. 
B)A+B+C. 
C)D+H+F. 
D)F.

Quizplus · Accepted Answer

Consumer surplus is the difference between the price consumers are willing to pay for a good and the price they actually pay. After the tax is levied, the price consumers pay increases, so consumer surplus decreases. Area A represents the decrease in consumer surplus.

Figure 8-5 Suppose That the Government Imposes a Tax of P3 -