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Effects of Taxes on a Market
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Problem 10
Effects of Taxes on a Market
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6. Introduction to Taxes and Subsidies / Effects of Taxes on a Market / Problem 6
Problem 6
In a market with a tax, how is tax revenue represented in terms of consumer and producer surplus?
A
Tax revenue is the area transferred from consumer and producer surplus to the government, represented by B+D.
B
Tax revenue is the area that decreases producer surplus, represented by D+F.
C
Tax revenue is the area that increases consumer surplus, represented by C+E.
D
Tax revenue is the area that remains constant, represented by A+F.
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