what is the amount of total surplus without the exercise tax Use the figure below to...

Question

Question

what is the amount of total surplus without the exercise tax

Answer 1

Answer #1

Total surplus refers to the area below the demand curve and above supply curve.

Numerically, it is the triangle formed between the intersection of demand and supply curves.

Without the excise tax, the demand and supply curves intersect at point b.

Total surplus = ½ x (21-1) x 10

Total surplus = 100

Thus, correct option: (a) $100

Answer 2

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