-The Figure Above Shows a Tax Imposed on a Good

question 92

Multiple Choice

-The figure above shows a tax imposed on a good with an external cost. The area of the rectangle abcd equals

• A) the MC.
• B) the total tax revenue collected by the government.
• C) the amount of pollution tax per tonne.
• D) the MSB.
• E) the deadweight loss.

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Definitions:

Equivalent Variation

An economic measure of the change in income needed to maintain utility after a price change, keeping utility constant before and after the change.

Consumption

The use of goods and services by households, encompassing spending on necessities and discretionary items.

Demand Function

A mathematical representation showing the quantity of a good or service demanded at different prices.

Consumer's Surplus

The difference between the total amount that consumers are willing to pay for a good or service and the total amount that they actually pay.