The Inverse Demand Function for Eggs Is P = 84

question 9

Multiple Choice

The inverse demand function for eggs is p = 84 - 9q, where q is the number of cases of eggs.The inverse supply is p = 7 + 2q.In the past, eggs were not taxed, but now a tax of 33 dollars per case has been introduced.What is the effect of the tax on the quantity of eggs supplied?

• A)Quantity drops by 2 cases.
• B)Quantity drops by 3 cases.
• C)Quantity drops by 6 cases.
• D)Quantity drops by 4 cases.
• E)None of the above.

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Definitions:

Market Yield

The rate of return anticipated on a bond if it is held until the maturity date, factoring in its current price, interest payments, and term length.

Treasury Bills

Short-term government securities issued at a discount from face value and mature at par.

Market Risk Premium

The extra return expected by investors for holding a risky market portfolio instead of risk-free assets.

Retained Earnings

Profits that a company chooses to keep for reinvestment in its operations rather than distributing to shareholders as dividends.