Suppose That the Market for Cigarettes Is Initially in Equilibrium $P = 60 - Q ^ { d }$

question 78

Multiple Choice

Suppose that the market for cigarettes is initially in equilibrium and is perfectly competitive. The demand curve can be expressed as $P = 60 - Q ^ { d }$ ; the supply curve can be expressed as $P =$ $0.5 Q ^ { s }$ . Quantity is expressed in millions of boxes per month. Now suppose that the federal government imposes a production quota on cigarettes of 30 million boxes per month. What are the new amount traded and the price in this market?

• A) \(Q = 40 ; P = 20\)
• B) \(Q = 20 ; P = 40\)
• C) \(Q = 30 ; P = 30\)
• D) \(Q = 30 ; P = 15\)

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Definitions:

Lump Sum Payment

A single payment made for the total amount owed, rather than breaking the payment into installments, often used in settling debts or purchasing goods.

Simple Interest

A method of calculating the interest charge on a loan or financial product based on the original principal amount and the interest rate over a period of time.

Principal Amount

This is the original sum of money borrowed in a loan or put into an investment, not including any interest or dividends.

Invested

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