Excise Tax Revenue as a Rectangle

Steps:

• Identify the vertical distance between S and S1 as the tax per unit (e.g., from P to R at quantity Q1).
• Determine the post-tax equilibrium quantity (e.g., at point T on S1).
• Locate the rectangle formed by the tax height and the quantity base, bounded by points like O, R, W, T.
• Confirm this area equals tax rate times units sold, representing total government revenue.

Why C is correct:

• PRWT is the rectangular area equal to tax per unit (PR) times post-tax quantity (OT), per the revenue formula for excise taxes.

Why the others are wrong:

• A. ORWY: Represents producer surplus loss, not revenue.
• B. POUT: Captures deadweight loss triangle, not revenue.
• D. ORWU: Includes pre-tax surplus, exceeding actual revenue.

Final answer: C