-In the Above Figure, Suppose the Government Subsidizes the Production

question 67

Multiple Choice

-In the above figure, suppose the government subsidizes the production of milk so that milk production increases to 8 million gallons per day. What is the size of the deadweight loss? (Hint: It is equal to the triangular area of negative consumer and producer surplus that results when output exceeds the efficient level.)

• A) $12.5 million
• B) $6.25 million
• C) $4.50 million
• D) $2.25 million

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