eet Kaur: Attempt 1 uestion 4 Figure 8.17 shows the effect of a tax intended to reduce the consumption of butter. The before-tax equilibrium is at A = (2.0 kg. 45 kr) and the after-tax equilibrium is at B = (1.6 kg, 54 kr). The tax imposed is 10 kr per kg of butter. Which of the following statements is correct? 100 90 80 70 Consumer wimples supplycurve 60 Price, P (kr per kg) Tax Supply curve 20 Demand curve 10 0.0 05 10 1.5 20 25 30 3.5 40 Quantity of butter, Q (kg per person per year)80 70 After tax Consumer surplus supply curve 60 Price, P (kr per kg) Tax Supply curve 20 Demand curve 10 0.0 0.5 10 15 2.0 25 3.0 35 4.0 Quantity of butter, Q (kg per person per year) The producers receive 45 kr per kg of butter. The tax policy would be more effective if the supply curve were less elastic. The consumer surplus increases but the producer surplus decreases. The loss of consumer surplus due to tax is (1/2) x 10 x (2.0 - 1.6) = 2.0