Suppose the Market for Dry Cleaning Has an Inverse Demand

question 37

Multiple Choice

Suppose the market for dry cleaning has an inverse demand of P = 12 - 0.10Q and an inverse supply curve (MC) of P = 0.10Q, where P is the price per article of clothing and Q is the quantity of clothing laundered. Suppose the external marginal cost of dry cleaning is 80 cents. To correct the market inefficiency, the government could set a quota on the number of laundered pieces of clothing equal to ____ articles of clothing.

• A) 102
• B) 88
• C) 56
• D) 22

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