Asked by Shanine Bonsol on Sep 23, 2024
Verified
A consumer values a car at $30,000 and a producer values the same car at $20,000.The transaction will not take place if a tax is imposed
A) equal to the seller surplus
B) smaller than the total surplus
C) larger than the total surplus
D) smaller than the buyer surplus
Total Surplus
Total surplus is the sum of consumer surplus and producer surplus in a market, representing the overall economic benefit to society from market transactions.
Imposed
Refers to actions or conditions that are applied or enforced by authority or necessity without the recipient's active consent.
- Assess the effects of taxation on market transactions and pricing dynamics.
Verified Answer
PP
Philip Porter5 days ago
Final Answer :
C
Explanation :
The transaction will not take place if the tax is larger than the total surplus, which is the sum of the seller surplus and buyer surplus. In this case, the seller surplus is $10,000 ($30,000 - $20,000), and the buyer surplus is $20,000 ($30,000 - the price they would pay). Therefore, the total surplus is $30,000. If the tax imposed is larger than $30,000, neither the buyer nor the seller would find it worthwhile to trade and the transaction will not take place.
Learning Objectives
- Assess the effects of taxation on market transactions and pricing dynamics.