Suppose the Market Demand Function for Ice Cream Is

question 35

Multiple Choice

Suppose the market demand function for ice cream is and the market supply function for ice cream is ,both measured in millions of gallons of ice cream per year.Suppose the government imposes a $0.50 tax on each gallon of ice cream.The deadweight loss due to the tax is

• A) $0.16
• B) $2.84
• C) $1.16
• D) $2.36

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Definitions:

Total Revenues

The overall amount of money generated by a business or economic entity from its activities.

Car Dealership

A business establishment that sells new or used cars at the retail level, typically based on a dealership contract with an automaker.

Elasticity of Demand

A measure of how the quantity demanded of a good or service changes in response to a change in its price.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price level in a specified time period.