-In the figure above,suppose that the government imposes a tax of $4 per pizza.Then,the
A) buyers and sellers equally share the incidence of the tax.
B) shaded area is the deadweight loss from the tax.
C) shaded area is the tax revenue from the tax.
D) Both answers A and B are correct.
E) Both answers A and C are correct.

Question

-In the figure above,suppose that the government imposes a tax of $4 per pizza.Then,the
A) buyers and sellers equally share the incidence of the tax. 
B) shaded area is the deadweight loss from the tax. 
C) shaded area is the tax revenue from the tax. 
D) Both answers A and B are correct. 
E) Both answers A and C are correct.

Quizplus · Accepted Answer

The shaded area represents the deadweight loss from the tax, which is the loss of consumer and producer surplus that results from the imposition of the tax. The incidence of the tax is shared equally by buyers and sellers, as the tax causes the equilibrium price to rise by $2, which is half of the tax amount.

-In the Figure Above,suppose That the Government Imposes a Tax