Refer to Exhibit 4. If a tax is placed on the product in this market tax revenue paid by the buyers is the area ?
Correct answer: B. B
- A. B + C + E + F
- B. B
- C. B + C
- D. A
Explanation
The buyers’ share of the tax burden is represented by area B, the vertical gap between the original market price and the price buyers pay after tax. Total tax revenue would include both buyers’ and sellers’ portions, shown as B + C.
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