Suppose the Market for Oranges Is Perfectly Competitive and Unregulated

question 10

Multiple Choice

Suppose the market for oranges is perfectly competitive and unregulated.Suppose also that the chemicals used to keep the oranges insect-free damage the environment by an estimated $1 per bushel of oranges.Suppose Q_D = 1000 - 100P and Q_S = -100 + 100P.If regulators limited production to 200 bushels,the deadweight loss relative to the option of setting the optimal tax would be would be

• A)$0
• B)$200
• C)$500
• D)$1000

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Definitions:

Fixed Overhead

Charges that keep the same level despite the degree of manufacturing or sales activities, including space rental, worker wages, and protection plans.

Predetermined Overhead Rate

An estimated overhead cost rate used in cost accounting to allocate overhead expenses to products or job orders.

Direct Labor Costs

Compensation and perks given to workers directly engaged in creating products or services.

Fixed Overhead

Regular, unchanged costs associated with operating a business, such as rent and salaries, irrespective of production levels.