Suppose That the Market for Cigarettes Is Initially in Equilibrium $P = 60 - Q ^ { d }$

question 6

Multiple Choice

Suppose that the market for cigarettes is initially in equilibrium and is perfectly competitive. The demand curve can be expressed as $P = 60 - Q ^ { d }$ ; the supply curve can be expressed as $P = 0.5 Q ^ { 5}$ . 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 is the change in producer surplus (per million boxes) associated with the quota?

• A) $175.
• B) $75.
• C) $50.
• D) $25.

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