Question

Order Confirmation 222/quizzes/468309/take Question 15 1 pts Use the following information to answer the following questions. The following graph depicts a market where a tax has been imposed. Pe was the equilibrium price before the tax was imposed, and Qe was the equilibrium quantity. After the tax, Pc is the price that consumers pay, and Ps is the price that producers receive. Qr units are sold after the tax is imposed. NOTE: The areas B and Care rectangles that are divided by the supply curve Sr. Include both sections of those rectangles when choosing your answers. Which areas represent the amount of consumer surplus lost due to the tax?

Answer 1

Ans) Consumer surplus is the difference between buyers willingness to pay and what he actually pays. Producer surplus is the difference between producers willingness to sell and the price he actually receives.

When tax is imposed, if creates deadweightloss, which is welfare loss to the society.

Before tax÷

Consumer surplus = A + B + F

Producer surplus = E + C + G

After tax÷

Consumer surplus = A

Producer surplus= E

Tax revenue = B + C

Deadweightloss = F + G

So, loss of consumer surplus = (A + B + F) - (A) = B + F

Loss of producer surplus = (E + C + G) - (E) = C + G

Option c is correct