Assume the Supply Curve for Diapers Is a Typical,upward-Sloping Straight

question 56

Multiple Choice

Assume the supply curve for diapers is a typical,upward-sloping straight line,and the demand curve for diapers is a typical,downward-sloping straight line.Suppose the equilibrium quantity in the market for diapers is 1,000 per month when there is no tax.Then a tax of $0.50 per diaper is imposed.The effective price paid by buyers increases from $1.50 to $1.90 and the effective price received by sellers falls from $1.50 to $1.40.The government's tax revenue amounts to $475 per month.Which of the following statements is correct?

• A)After the tax is imposed,the equilibrium quantity of diapers is 900 per month.
• B)The demand for diapers is more elastic than the supply of diapers.
• C)The deadweight loss of the tax is $12.50.
• D)The tax causes a decrease in consumer surplus of $380.

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Profitability

A financial metric used to assess the ability of a business to generate earnings compared to its expenses over a specific period.

Current Ratio

A financial metric that measures a company's ability to pay off its short-term liabilities with its short-term assets.

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Financial obligations or debts that a company owes to others.

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Money owed by one party to another under the condition of repayment, often including interest charges.