The Demand and Supply Curves for a Product Are Q^D

question 58

Multiple Choice

The demand and supply curves for a product are Q^D = 50 - 0.5P and Q^S = 2.5P + 5, where P is the price per unit and Q measures millions of units. If the government levies a $1.20 per unit tax on buyers, what is the size of the deadweight loss?

• A) $300,000
• B) $500,000
• C) $800,000
• D) $1.2 million

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