The Demand and Supply of Ethanol Are Given by Q^D

question 28

Multiple Choice

The demand and supply of ethanol are given by Q^D = 8,000 - 2,000P and Q^S = 1,000P - 1,000, where P is price per gallon and Q measures gallons per minute. If the government subsidizes ethanol at $0.30 per gallon, what is the deadweight loss?

• A) $30
• B) $7,800
• C) $440
• D) $119

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