Figure 8-8
Suppose the government imposes a $10 per unit tax on a good.
-Refer to Figure 8-8.The tax causes consumer surplus to decrease by the area
A)A.
B)B+C.
C)A+B+C.
D)A+B+C+D+F.

Question

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good. 
-Refer to Figure 8-8.The tax causes consumer surplus to decrease by the area
A)A. 
B)B+C. 
C)A+B+C. 
D)A+B+C+D+F.

Quizplus · Accepted Answer

The tax causes a decrease in consumer surplus equal to the combined areas of B and C, as shown in the graph. The tax increases the price paid by consumers, reducing their willingness to pay, and leading to a decrease in the quantity demanded. As a result, consumer surplus decreases by the area between the original demand curve and the new, post-tax demand curve, which is equal to B + C.

Figure 8-8 Suppose the Government Imposes a $10 Per Unit Tax on Tax