Suppose a tax of $4 per unit is imposed on a good,and the tax causes the equilibrium quantity of the good to decrease from 2,000 units to 1,700 units.The tax decreases consumer surplus by $3,000 and decreases producer surplus by $4,400.The deadweight loss of the tax is
A)$200.
B)$400.
C)$600.
D)$1,200.

Question

Quizplus · Accepted Answer

Deadweight loss can be calculated using the following formula: 
DWL = 1/2 x (tax per unit x change in quantity) - (tax per unit x triangle area)

Where triangle area is the difference between the consumer surplus and producer surplus.

Using the given information: 
Tax per unit = $4
Change in quantity = 200 units (2000 - 1700)

Therefore, DWL = 1/2 x (4 x 200) - (4 x ((4400 + 3000)/4)) = $600

Hence, the answer is C.

Suppose a Tax of $4 Per Unit Is Imposed on a Good,and