Figure 8-7
The vertical distance between points A and B represents a tax in the market.
-Refer to Figure 8-7.Which of the following statements is correct?
A)The loss of producer surplus that is associated with some sellers dropping out of the market as a result of the tax is $60.
B)The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is $120.
C)The loss of consumer surplus caused by this tax exceeds the loss of producer surplus caused by this tax.
D)This tax produces $320 in tax revenue for the government.

Question

Figure 8-7
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-7.Which of the following statements is correct?
A)The loss of producer surplus that is associated with some sellers dropping out of the market as a result of the tax is $60. 
B)The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is $120. 
C)The loss of consumer surplus caused by this tax exceeds the loss of producer surplus caused by this tax. 
D)This tax produces $320 in tax revenue for the government.

Quizplus · Accepted Answer

The loss of consumer surplus for those buyers who continue to buy the good after the tax is imposed is $120. This is calculated by considering the change in price and quantity for consumers who still purchase the good despite the tax.

Figure 8-7 the Vertical Distance Between Points a and B Represents a Represents