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

question 10

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 deadweight loss due to the tax is:

• A) $944,444.
• B) $2.83 million.
• C) $1.67 million.
• D) $1.89 million.

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Definitions:

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