Figure 8-12
-Refer to Figure 8-12.Suppose a $3 per-unit tax is placed on this good.The loss of producer surplus resulting from this tax is
A)$5.50.
B)$17.50.
C)$22.50.
D)$45.00

Question

Figure 8-12 
-Refer to Figure 8-12.Suppose a $3 per-unit tax is placed on this good.The loss of producer surplus resulting from this tax is
A)$5.50. 
B)$17.50. 
C)$22.50. 
D)$45.00

Quizplus · Accepted Answer

To find the loss of producer surplus, we need to find the difference between the original producer surplus (area A+B) and the new producer surplus after the tax (area A). The loss of producer surplus is B, which is the triangle above the supply curve and below the new equilibrium price after the tax. Using the formula for the area of a triangle, the loss of producer surplus is (1/2)(5)(7-4) = $17.50.

Figure 8-12 -Refer to Figure 8-12.Suppose a $3 Per-Unit Tax Is Placed