Suppose That the Market for Cigarettes Is Initially in Equilibrium

question 3

Multiple Choice

Suppose that the market for cigarettes is initially in equilibrium and is perfectly competitive.The demand curve can be expressed as ; the supply curve can be expressed as Quantity is expressed in millions of boxes per month.Now suppose that the federal government imposes a production quota on cigarettes of 30 million boxes per month.What are the new amount traded and the price in this market?

• A) Q = 40; P = 20
• B) Q = 20; P = 40
• C) Q = 30; P = 30
• D) Q = 30; P = 15

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