The Inverse Demand Function for Cases of Whiskey Defined by P

question 3

Multiple Choice

The inverse demand function for cases of whiskey defined by p = 186 - 6q, and the inverse supply function is defined by p = 90 + 2q.Originally there was no tax on whiskey.Then the government began to tax suppliers of whiskey $32 for every case they sold.How much did the price paid by consumers rise when the new equilibrium was reached?

• A)It rose by $32.
• B)It rose by $24.
• C)It rose by $22.
• D)It rose by $34.
• E)None of the above.

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Definitions:

Fixed Costs

Costs that do not vary with the level of production or sales volume, remaining constant even as production levels change.

Break-even Point

The point at which total costs equal total revenue, resulting in no net loss or gain for the business.

Variable Cost

Costs that vary directly with the level of production or sales volume, such as raw materials and direct labor.

Fixed Costs

Costs that do not change in total despite changes in the volume of goods or services produced or sold.