Suppose That the Equilibrium Quantity in the Market for Widgets

question 83

Multiple Choice

Suppose that the equilibrium quantity in the market for widgets has been 300 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 1000 per month in revenue from the tax.What is the deadweight loss from the tax

• A)$50
• B)$100
• C)$250
• D)$500

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