Answered: $12.00 tax So R $9.00 $7.00 $6.00 w D

Business

Economics

$12.00 tax So R $9.00 $7.00 $6.00 w D

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Use the graph to answer the following question:

Which letters on the graph represent consumer surplus before the tax?

A) W, T, and V

B) R, S, T, and W

C) U and V

D) R, S, and U

The graph below represents a $3 per unit tax on sellers.
S1
Price
$12.00
tax
So
R
$9.00
$7.00
$6.00
D

Consumer’s gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price and up to the equilibrium quantity. Consumer surplus is represented by area A.

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