Figure 8-7 the Vertical Distance Between Points a and B Represents a Represents

question 388

Multiple Choice

Figure 8-7
The vertical distance between points A and B represents a tax in the market.

-Refer to Figure 8-7.As a result of the tax,consumer surplus decreases by

• A) $65, producer surplus decreases by $85, tax revenue is $120, and deadweight loss is $30.
• B) $75, producer surplus decreases by $75, tax revenue is $120, and deadweight loss is $30.
• C) $80, producer surplus decreases by $80, tax revenue is $120, and deadweight loss is $40.
• D) $120, producer surplus decreases by $120, tax revenue is $200, and deadweight loss is $40.

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Definitions:

Product Uses

The various applications or purposes for which a product is intended or can be utilized by consumers.

Unit Elasticity

A situation in economics where a change in the price of a good or service results in a proportionally equal change in the quantity demanded or supplied.

Price Elasticity of Demand

A measure of the sensitivity of quantity demanded of a good to a change in its price.

Demand Curve

The graphical representation that illustrates the quantity of a particular good or service that consumers are willing and able to purchase at various price points.