Consider a Perfectly Competitive Market with Market Supply $Q ^ {5 } = - 2 + P$

question 61

Multiple Choice

Consider a perfectly competitive market with market supply $Q ^ {5 } = - 2 + P$ and market demand $Q ^ { d } = 30 - P$ . Suppose the government imposes an excise tax of $4 per unit on this market. What is the deadweight loss from this tax?

• A) 2
• B) 4
• C) 6
• D) 8

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Definitions:

Conversion Cost

The sum of direct labor and manufacturing overhead costs, representing the expenses to convert raw materials into finished goods.

Direct Materials

The raw materials and components that are directly used in the production of a product and can be easily associated with it.

Fabrication Department

A specialized division within a company responsible for the manufacturing and assembly of products or components.

Weighted-Average Method

A technique for calculating the cost of goods sold and remaining stock that uses the mean cost of all available units for sale.