Refer to the Provided Supply and Demand Graph of Product

question 167

Multiple Choice

Refer to the provided supply and demand graph of Product X. What would happen if the government taxed the producers of this product because it has negative externalities in production?

• A) supply would increase
• B) demand would decrease
• C) supply would decrease
• D) price would decrease

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Definitions:

Consumer Surplus

The difference in consumer's payment expectation versus their actual expenditure on a good or service.

Demand Curve

A graph representing the relationship between the price of a good and the amount consumers are willing and able to purchase at various prices.

Producer Surplus

The difference between the actual price at which a producer sells a product and the minimum price they would be willing to accept, indicating producer gain.

Consumer Surplus

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