Figure 8-5

-Refer to Figure 8-5.When a tax is imposed in this market,consumer surplus is
A)$600.
B)$900.
C)$1,500.
D)$3,000.

Question

Figure 8-5
 
-Refer to Figure 8-5.When a tax is imposed in this market,consumer surplus is
A)$600. 
B)$900. 
C)$1,500. 
D)$3,000.

Quizplus · Accepted Answer

Consumer surplus is the area below the demand curve and above the equilibrium price, up to the quantity purchased before the tax is imposed. In this case, before the tax, the equilibrium price is $30 and the quantity purchased is 30 units. Consumer surplus is equal to 0.5*(30-15)*30 = $225. After the tax is imposed, the new equilibrium price is $35 and the quantity purchased is 20 units. Consumer surplus is now equal to 0.5*(30-20)*(35-15) = $675. Therefore, the total consumer surplus after the tax is $225 + $675 = $900.

Figure 8-5 -Refer to Figure 8-5.When a Tax Is Imposed in This