Can you please correct my answer? Figure 8-6The vertical distance between points A and B represents a tax in the market.Price22 +2018Supply1614 +121064Demand2100 200 300 400 500 600 700 800 900 1000QuartityRefer to Figure 8-6. What happens to consumer surplus when the tax is imposed in this market?Consumer surplus falls by $3,600.Consumer surplus falls by $2,700.Consumer surplus falls by $1,800.Consumer surplus falls by $900.

Figure 8-6 The vertical distance between points A and B represents a tax in the market. Price 22 k 20 + 18 + Supply 16 14 + 12 10 8+ 6. 4 + Demand 2 100 200 300 400 500 600 700 800 900 1000 Quantity Refer to Figure 8-6. What happens to consumer surplus when the tax is imposed in this market? Consumer surplus falls by $3,600. Consumer surplus falls by $2,700. Consumer surplus falls by $1,800. Consumer surplus falls by $900.

Figure 8-6 The vertical distance between points A and B represents a tax in the market. Price 22 k 20 + 18 + Supply 16 14 + 12 10 8+ 6. 4 + Demand 2 100 200 300 400 500 600 700 800 900 1000 Quantity Refer to Figure 8-6. What happens to consumer surplus when the tax is imposed in this market? Consumer surplus falls by $3,600. Consumer surplus falls by $2,700. Consumer surplus falls by $1,800. Consumer surplus falls by $900.

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter8: Application: The Cost Of Taxation

Section: Chapter Questions

Problem 8PA

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Question

Can you please correct my answer?

Figure 8-6
The vertical distance between points A and B represents a tax in the market.
Price
22 +
20
18
Supply
16
14 +
12
10
6
4
Demand
2
100 200 300 400 500 600 700 800 900 1000
Quartity
Refer to Figure 8-6. What happens to consumer surplus when the tax is imposed in this market?
Consumer surplus falls by $3,600.
Consumer surplus falls by $2,700.
Consumer surplus falls by $1,800.
Consumer surplus falls by $900.

Expert Solution

Step 1

Consumer Surplus when there is no tax = 1/2*(22-10)*600 = 300*12 = 3600

Consumer Surplus when there is tax = 1/2*(22-16)*300 = 150*6 = 900

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