For a Good That Is Taxed, the Area on the Relevant

question 121

Multiple Choice

For a good that is taxed, the area on the relevant supply-and-demand graph that represents government's tax revenue is

• A)smaller than the area that represents the loss of consumer surplus and producer surplus caused by the tax.
• B)bounded by the supply curve, the demand curve, the effective price paid by buyers, and the effective price received by sellers.
• C)a right triangle.
• D)a triangle, but not necessarily a right triangle.

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Definitions:

Classical Economics

An economic theory advocating for minimal government intervention in the market, emphasizing free-markets and the idea that markets naturally tend towards equilibrium.

Mainstream Economics

The body of economic thought and analysis that is widely accepted and taught across major universities, focusing largely on microeconomics and macroeconomics theories.

Great Depression

A severe worldwide economic depression that took place mostly during the 1930s, starting in the United States.

John Maynard Keynes

A British economist whose ideas fundamentally changed the theory and practice of macroeconomics and economic policies of governments.