Asked by disney. dreams on May 11, 2024
Verified
Refer to Figure 8-2. Consumer surplus without the tax is
A) $24, and consumer surplus with the tax is $6.
B) $6, and consumer surplus with the tax is $24.
C) $16, and consumer surplus with the tax is $4.
D) $4, and consumer surplus with the tax is $16.
Consumer Surplus
The separation between the ideal amount consumers are willing to spend on a service or product and their real expenditures.
Producer Surplus
The discrepancy between what producers are ready to take for a product or service and the real amount they get.
Tax
A required contribution or another kind of monetary levy imposed by a government body on a taxpayer to underpin government expenditure and different public spending initiatives.
- Examine the repercussions taxes have on the welfare of consumers, the profitability of producers, and the comprehensive economic surplus.
Verified Answer
JT
James ThomasMay 15, 2024
Final Answer :
A
Explanation :
Consumer surplus is the area between the demand curve and the price level, up to the quantity traded. Without the tax, the consumer surplus is larger because the price is lower and more quantity is demanded. With the tax, the price consumers pay increases, reducing the consumer surplus. Therefore, the option that shows a decrease in consumer surplus from $24 to $6 with the introduction of the tax is correct.
Learning Objectives
- Examine the repercussions taxes have on the welfare of consumers, the profitability of producers, and the comprehensive economic surplus.