In the Market for Widgets,the Supply Curve Is the Typical

question 205

Multiple Choice

In the market for widgets,the supply curve is the typical upward-sloping straight line,and the demand curve is the typical downward-sloping straight line.The equilibrium quantity in the market for widgets is 200 per month when there is no tax.Then a tax of $5 per widget is imposed.The price paid by buyers increases by $2 and the after-tax price received by sellers falls by $3.The government is able to raise $750 per month in revenue from the tax.The deadweight loss from the tax is

• A)$250.
• B)$125.
• C)$75.
• D)$50.

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Definitions:

Equilibrium Price

The market price at which the supply of an item matches its demand, leading to economic stability in the market.

Supply Curve

An illustrative diagram depicting the link between the cost of an item and the volume merchants are ready to provide.

Supply Curve

A graphical representation showing the correlation between the price of a good or service and the amount that suppliers are willing to produce and sell at each price level.

Quantity Demanded

The aggregate quantity of a product or service that buyers are ready and able to buy at a specific price point during a certain timeframe.