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

Question

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

Quizplus · Accepted Answer

The tax causes a reduction in both consumer and producer surplus. The reduction in consumer surplus is represented by areas B and C, while the reduction in producer surplus is represented by areas E and F. Therefore, the correct answer is B, which is the sum of the areas B and C.

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