A market where a tax has been imposed

Choose 1 answer:
(A) $3 imes(\$ 13-\$ 11)$
(B) $\frac{1}{2}(3) imes(\$ 16-\$ 13)$
(C) $\frac{1}{2}(\$ 13-\$ 7) imes(5-3)$
(D) $\frac{1}{2}(5) imes(\$ 16-\$ 11)$
(E) $3 imes(\$ 11-\$ 7)$

Question

A market where a tax has been imposed

Choose 1 answer:
(A) $3 	imes(\$ 13-\$ 11)$
(B) $\frac{1}{2}(3) 	imes(\$ 16-\$ 13)$
(C) $\frac{1}{2}(\$ 13-\$ 7) 	imes(5-3)$
(D) $\frac{1}{2}(5) 	imes(\$ 16-\$ 11)$
(E) $3 	imes(\$ 11-\$ 7)$

Accepted Answer

∻Solution∻ ‖ a ⋮ Identify the area of interest: The graph shows a market where a tax has been imposed. The intersection of the supply (S1) and demand (D) curves is at (5,11). ‖ ‖ b ⋮ Determine the relevant points: The points of interest are (3,7) on the supply curve and (3,13) on the demand curve. ‖ ‖ c ⋮ Calculate the area of the triangle: The area of the triangle formed by these points represents the deadweight loss due to the tax. The base of the triangle is $5-3=2$ and the height is $13-7=6$. ‖ ‖ d ⋮ Apply the formula for the area of a triangle: The area is given by $\frac{1}{2} imes ext{base} imes ext{height} = \frac{1}{2} imes 2 imes 6 = 6$. ‖ ‖ e ⋮ Match the calculation with the given options: The correct option is (C) $\frac{1}{2}(13-7) imes (5-3)$. ‖ ∻Answer∻ ⚹ (C) $\frac{1}{2}(13-7) imes (5-3)$ ⚹ ∻Key Concept∻ ⚹ Deadweight Loss ⚹ ∻Explanation∻ ⚹ The deadweight loss due to a tax is represented by the area of the triangle formed between the supply and demand curves at the new quantity and the original equilibrium quantity. ⚹◊What is the impact of a tax on a market in terms of consumer and producer surplus⍭ Generate me a similar question◊

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