Scenario 12-1
Ken places a $20 value on a cigar, and Mark places a $17 value on it. The equilibrium price for this brand of cigar is $15.
-Refer to Scenario 12-1. Suppose the government levies a tax of $3 on each cigar, and the equilibrium price of a cigar increases to $18. What is total consumer surplus after the tax is levied?
A)$0
B)$2
C)$5
D)$6

Question

Quizplus · Accepted Answer

After the tax, Ken still buys the cigar as his value ($20) is greater than the new price ($18), gaining a consumer surplus of $2 ($20 - $18). Mark does not buy the cigar as his value ($17) is less than the new price. Total consumer surplus is $2.

Scenario 12-1 Ken Places a $20 Value on a Cigar, and Mark