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

question 34

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 is the deadweight loss (per million boxes) associated with the quota?

• A) \(\$ 275\)
• B) \(\$ 75\)
• C) \(\$ 50\)
• D) \(\$ 25\)

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Definitions:

Unreported Income

Earnings not declared to tax authorities, often to evade taxation; part of the informal or shadow economy.

GNP

Gross National Product is the total dollar value of all goods and services produced over a specific time period by the nationals of a country, regardless of where the production takes place.

GDP

Gross Domestic Product; the total value of all goods and services produced over a specific time period within a country.

Per Capita GDP

The average economic output per person, calculated by dividing the Gross Domestic Product (GDP) of a country by its total population.