Question

Microeconomics

Posted 5 months ago

```
A market where a tax has been imposed
Choose 1 answer:
(A) $3 \times(\$ 13-\$ 11)$
(B) $\frac{1}{2}(3) \times(\$ 16-\$ 13)$
(C) $\frac{1}{2}(\$ 13-\$ 7) \times(5-3)$
(D) $\frac{1}{2}(5) \times(\$ 16-\$ 11)$
(E) $3 \times(\$ 11-\$ 7)$
```

Sign in to unlock the answer

Answer from Sia

Posted 5 months ago

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 $\frac{1}{2} \times \text{base} \times \text{height} = \frac{1}{2} \times 2 \times 6 = 6$

e

Match the calculation with the given options: The correct option is (C) $\frac{1}{2}(13-7) \times (5-3)$

Answer

(C) $\frac{1}{2}(13-7) \times (5-3)$

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.

Not the question you are looking for? Ask here!

Enter question by text

Enter question by image

Upgrade to Asksia Pro

Join a AskSia's Pro Plan, and get 24/7 AI tutoring for your reviews, assignments, quizzes and exam preps.

Unlimited chat query usages

Strong algorithms that better know you

Early access to new release features

Study Other Question