Figure 8-7
The vertical distance between points A and B represents a tax in the market.
-Refer to Figure 8-7.The deadweight loss associated with this tax amounts to
A)$80,and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses.
B)$80,and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers.
C)$60,and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses.
D)$60,and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers.

Question

Figure 8-7
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-7.The deadweight loss associated with this tax amounts to
A)$80,and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses. 
B)$80,and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers. 
C)$60,and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses. 
D)$60,and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers.

Quizplus · Accepted Answer

Deadweight loss refers to the loss of surplus that occurs when a tax discourages mutually advantageous trades between buyers and sellers. In this case, the deadweight loss is measured by the area of the triangle formed by the base of the tax and the vertical distance between the supply and demand curves where the tax is imposed. This area amounts to $80 and is represented by the shaded region in the graph. Therefore, the correct answer is B.

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