Suppose That the Equilibrium Quantity in the Market for Widgets

question 188

Multiple Choice

Suppose that the equilibrium quantity in the market for widgets has been 200 per month.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.What is the deadweight loss from the tax

• A)$50
• B)$75
• C)$125
• D)$250

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Definitions:

Product Cost

The total expenses incurred to create a product, including direct labor, materials, and manufacturing overhead.

Period Cost

Expenses that are not directly tied to the production of goods and are charged to the time period in which they are incurred.

Manufacturing Company

A type of company that uses raw materials, parts, and components to assemble finished goods.

Direct Labor

The labor costs directly tied to the production of goods or services, including wages of workers directly involved in manufacturing.