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

question 53

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 change in producer surplus due to the tax is:

• A) $3.56 million.
• B) $1.89 million.
• C) $7.11 million.
• D) $944,444.

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