Question

Figure TXA. Suppose the government imposes a $10 per-unit tax on a good. 20+ A - - 16+ 14+ 12+- - - - FI 10+ D il H G -- - -- -- - 4+ K L ; M - - - 4 8 12 16 20 24 28 32 36 0 17. See Figure TXA. The tax causes consumer surplus to decrease by the area a. B+C. b. A. c. A+B+C+D+F. d. A+B+C. 18. See Figure TXA. The government collects tax revenue that is the area a. C+F. b. L. c. B+D. d. F+G+L. See Figure TXA. The $10 tax will a. cause a $10 increase in consumer prices. b. create an excess demand of 20 units. result in nonprice rationing. allocate goods to the consumers with the highest willingness to pay.

Explain why answers are correct. I already know the correct answer, i need to know why.

Answer 1

Ans17) the correct option is a) B + C

Before tax, consumer surplus = A + B + C

After tax, consumer surplus = A

Decrease in consumer surplus = B+ C

Ans18) the correct option is c) B + D

Tax revenue = tax * quantity after tax

Ans19) the correct option is d) allocate goods to the consumers with the highest willingness to pay

When the tax is imposed, consumers pay higher prices from $ 12 to $ 18 so consumers with the higher willingness to pay can afford the good now.