Figure 8-9
The vertical distance between points A and C represents a tax in the market.
-Refer to Figure 8-9.The loss of consumer surplus as a result of the tax is
A)$2,000.
B)$4,000.
C)$6,000.
D)$8,000.

Question

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9.The loss of consumer surplus as a result of the tax is
A)$2,000. 
B)$4,000. 
C)$6,000. 
D)$8,000.

Quizplus · Accepted Answer

The loss of consumer surplus is the triangle between the original demand curve and the new demand curve after the tax is imposed. This triangle has a height of $6,000 (the tax amount) and a base of 4,000 units (the quantity decrease as a result of the tax). Therefore, the loss of consumer surplus is equal to 1/2 x $6,000 x 4,000 = $12,000. However, the government receives tax revenue equal to 1/2 x $6,000 x 2,000 = $6,000, so the net loss of surplus to society is $12,000 - $6,000 = $6,000.

Figure 8-9 the Vertical Distance Between Points a and C Represents a Represents