Figure 8-11 -Refer to Figure 8-11.Suppose Q₁ = 4;Q₂ = 7;P₁ = $6;P₂ = $8;and P₃ = $10.Then,when the tax is imposed, A)consumer surplus decreases by $11. B)producer surplus decreases by $11. C)the deadweight loss amounts to $6. D)All of the above are correct.

Question

Quizplus · Accepted Answer

When the tax is imposed, the new equilibrium price is equal to P₂ + tax = $8 + $2 = $10. - Consumer surplus decreases from area A + B + C to area A, resulting in a decrease of $11. - Producer surplus decreases from area E + F + G to area F, resulting in a decrease of $11. - Deadweight loss is the loss of welfare that occurs when the tax causes some mutually beneficial transactions not to occur. In this case, it is the area B + C + G, which amounts to $6. Therefore, all of the above statements are correct, and the best choice is D.

Figure 8-11 -Refer to Figure 8-11.Suppose Q1 = 4;Q2 = 7;P1 =

Figure 8-11 -Refer to Figure 8-11.Suppose Q₁ = 4;Q₂ = 7;P₁ =