Suppose the current equilibrium price of cheese pizzas is $10.00, and 11 million pizzas are sold per month. After the federal government imposes a $3.00 per pizza tax, the equilibrium price of pizzas rises to $12.00, and the equilibrium quantity falls to 9 million. Compare the economic surplus in this market when there is no tax to when there is a tax on pizza. With the tax, the change in economic surplus is O A. the new surplus equal to the area under the demand curve and above the supply curve for the market equilibrium quantity. B. the deadweight loss equal to the area under the demand curve and above the supply curve for units between the quantity with the tax and market equilibrium quantity. O C. the deadweight loss equal to the area under the demand curve and above the supply curve for the quantity with the tax. D. the new surplus equal to the area under the demand curve and above the supply curve for units between the quantity with the tax and market equilibrium quantity. New government revenue with the tax can be represented by A. the area of a rectangle with a height equal to the tax and a base equal to the quantity sold. B. the area of the triangle above the supply curve and below the equilibrium price. C. the area of a rectangle with a height equal to the difference in the equilibrium price and the tax and a base equal to the quantity sold. D. the area of a rectangle with a height equal to the equilibrium price and a base equal to the quantity sold.
Suppose the current equilibrium price of cheese pizzas is $10.00, and 11 million pizzas are sold per month. After the federal government imposes a $3.00 per pizza tax, the equilibrium price of pizzas rises to $12.00, and the equilibrium quantity falls to 9 million. Compare the economic surplus in this market when there is no tax to when there is a tax on pizza. With the tax, the change in economic surplus is O A. the new surplus equal to the area under the demand curve and above the supply curve for the market equilibrium quantity. B. the deadweight loss equal to the area under the demand curve and above the supply curve for units between the quantity with the tax and market equilibrium quantity. O C. the deadweight loss equal to the area under the demand curve and above the supply curve for the quantity with the tax. D. the new surplus equal to the area under the demand curve and above the supply curve for units between the quantity with the tax and market equilibrium quantity. New government revenue with the tax can be represented by A. the area of a rectangle with a height equal to the tax and a base equal to the quantity sold. B. the area of the triangle above the supply curve and below the equilibrium price. C. the area of a rectangle with a height equal to the difference in the equilibrium price and the tax and a base equal to the quantity sold. D. the area of a rectangle with a height equal to the equilibrium price and a base equal to the quantity sold.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Suppose the current equilibrium price of cheese pizzas is $10.00, and 11 million pizzas are sold per month. After the
federal government imposes a $3.00 per pizza tax, the equilibrium price of pizzas rises to $12.00, and the equilibrium
quantity falls to 9 million. Compare the economic surplus in this market when there is no tax to when there is a tax on
pizza.
With the tax, the change in economic surplus is
O A. the new surplus equal to the area under the demand curve and above the supply curve for the market equilibrium
quantity.
B. the deadweight loss equal to the area under the demand curve and above the supply curve for units between the
quantity with the tax and market equilibrium quantity.
O C. the deadweight loss equal to the area under the demand curve and above the supply curve for the quantity with
the tax.
D. the new surplus equal to the area under the demand curve and above the supply curve for units between the
quantity with the tax and market equilibrium quantity.
New government revenue with the tax can be represented by
A. the area of a rectangle with a height equal to the tax and a base equal to the quantity sold.
B. the area of the triangle above the supply curve and below the equilibrium price.
C. the area of a rectangle with a height equal to the difference in the equilibrium price and the tax and a base equal
to the quantity sold.
D. the area of a rectangle with a height equal to the equilibrium price and a base equal to the quantity sold.
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