An Excise Tax Imposed on Junk Food Reduces Consumer Surplus

question 60

Multiple Choice

An excise tax imposed on junk food reduces consumer surplus by $50,producer surplus by $80,and results in tax revenue of $40 for the government.What is the welfare effect of this tax?

• A)A net loss of $10
• B)A net gain of $40
• C)A net loss of $90
• D)A net loss of $130

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Definitions:

Manufacturer Profit

The financial gain a manufacturing company secures from its operations after deducting costs associated with production and distribution.

Short Term

A period of time that is immediate or not far in the future, usually less than a year, often used in reference to planning or financial strategies.

Product Availability

the extent to which a product is obtainable in the desired quantities at the right time and place for customers.

Revenue

The total amount of income generated by the sale of goods or services related to a company's primary operations.