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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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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