Figure 8-2
The vertical distance between points C and D represents a tax in the market.

-Refer to Figure 8-2. Consumer surplus without the tax is
A)$24, and consumer surplus with the tax is $6.
B)$6, and consumer surplus with the tax is $24.
C)$16, and consumer surplus with the tax is $4.
D)$4, and consumer surplus with the tax is $16.

Question

Figure 8-2
The vertical distance between points C and D represents a tax in the market.
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-Refer to Figure 8-2. Consumer surplus without the tax is
A)$24, and consumer surplus with the tax is $6. 
B)$6, and consumer surplus with the tax is $24. 
C)$16, and consumer surplus with the tax is $4. 
D)$4, and consumer surplus with the tax is $16.

Quizplus · Accepted Answer

Consumer surplus is the area between the demand curve and the price level, up to the quantity traded. Without the tax, the consumer surplus is larger because the price is lower and more quantity is demanded. With the tax, the price consumers pay increases, reducing the consumer surplus. Therefore, the option that shows a decrease in consumer surplus from $24 to $6 with the introduction of the tax is correct.

Figure 8-2 the Vertical Distance Between Points C and D Represents a Represents