Suppose the Market Demand Function for Ice Cream Is Q^d

question 42

Multiple Choice

Suppose the market demand function for ice cream is Q^d = 10 - 2P and the market supply function for ice cream is Q^s = 4P - 2,both measured in millions of gallons of ice cream per year.Suppose the government imposes a $0.50 tax on each gallon of ice cream.The consumer surplus with the tax is:

• A) $166,667.
• B) $3.56 million.
• C) $7.11 million.
• D) $9 million.

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Definitions:

Unilateral Contract

A contract in which one party makes a promise in exchange for the other party's performance, becoming binding once performance is completed.

Bilateral Promise

An agreement in which two parties make commitments to perform certain actions or obligations to one another.

Promissory Estoppel

A legal principle that prevents a party from withdrawing a promise made to a second party when the latter has reasonably relied on that promise to their detriment.

Unilateral Contracts

Unilateral contracts are agreements in which one party makes a promise in exchange for the other party's performance, not a promise of performance.