Suppose That a Local Government Has Imposed a Quota of 0.5

question 95

Multiple Choice

Suppose that a local government has imposed a quota of 0.5 million gallons on water usage. Before the quota is enforced, the market demand curve is given by
Q^D = 10 - 2.25P
And the market supply curve is given by
Q^S = -10 + 2.75P
Where the quantity is measured in millions of gallons per month and the price is in dollars per thousand gallons. After the quota is imposed, the quantity demanded becomes ____.

• A) 1,000,000
• B) 500,000
• C) 1,500,000
• D) 1,605,000

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