The Inverse Demand Function for Cases of Whiskey Defined by P

question 29

Multiple Choice

The inverse demand function for cases of whiskey defined by p = 160 - 6q, and the inverse supply function is defined by p = 61 + 3q. Originally there was no tax on whiskey. Then the government began to tax suppliers of whiskey $27 for every case they sold. How much did the price paid by consumers rise when the new equilibrium was reached?

• A) It rose by $27.
• B) It rose by $29.
• C) It rose by $18.
• D) It rose by $16.
• E) None of the above.

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Definitions:

Machine-Hours

A measure of production output or activity level, representing the total hours that machinery is operating over a specific period of time.

Markup

The difference between the cost of a good or service and its selling price, expressed as a percentage over the cost.

Variable Manufacturing Overhead

Costs that vary with production volume, including indirect materials, indirect labor, and other expenses that increase or decrease with output.

Direct Labor-Hours

The complete tally of hours that employees dedicate to the manufacturing process.