Suppose That a Market Is Initially in Equilibrium

question 5

Multiple Choice

Suppose that a market is initially in equilibrium.The initial demand curve is The initial supply curve is Suppose that the government imposes a $3 tax on this market.What is the change in producer surplus due to the tax?

• A) $900.
• B) $841.
• C) $59.
• D) $29.50.

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Definitions:

Variable Input

A factor of production whose quantity can be changed easily and flexibly by a firm in the short run to adjust output levels.

Average Variable Cost

The total variable cost divided by the quantity of output produced; it shows the variable cost per unit of output.

Marginal Product

The extra output generated from the inclusion of one additional unit of a particular input while maintaining all other inputs unchanged.

Variable Cost

Costs that change in proportion to the level of production output or activity level of an entity.