Figure 8-10
-Refer to Figure 8-10.Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2.With the tax,the producer surplus is
A)(P5-0)x Q5.
B)1/2 x (P5-0)x Q5.
C)(P8-0)x Q2.
D)1/2 x (P8-0)x Q2.

Question

Figure 8-10 
-Refer to Figure 8-10.Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2.With the tax,the producer surplus is
A)(P5-0)x Q5. 
B)1/2 x (P5-0)x Q5. 
C)(P8-0)x Q2. 
D)1/2 x (P8-0)x Q2.

Quizplus · Accepted Answer

The producer surplus is the area above the supply curve and below the price line. With the tax, the supply curve shifts to the left, reducing the quantity sold to Q2. The producer surplus is now the area above the new supply curve and below the price line, which is 1/2 x (P8-0)x Q2.

Figure 8-10 -Refer to Figure 8-10.Suppose the Government Imposes a Tax That