The total welfare associated with a market that includes a government sales tax equals
A) consumer surplus plus producer surplus.
B) consumer surplus plus producer surplus minus government tax revenue.
C) consumer surplus plus producer surplus plus government tax revenue.
D) the government tax revenue.

Question

Quizplus · Accepted Answer

The total welfare associated with a market that includes a government sales tax is the sum of consumer surplus, producer surplus, and government tax revenue. Therefore, option C is the correct answer. Option A is incorrect because it does not take into account the government tax revenue. Option B is incorrect because it subtracts the government tax revenue from the total welfare. Option D is incorrect because it only considers the government tax revenue, and not the consumer and producer surplus.

The Total Welfare Associated with a Market That Includes a Government