Suppose a Tax of $5 Per Unit Is Imposed on a Good

question 137

Multiple Choice

Suppose a tax of $5 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 200 units to 100 units. The tax decreases consumer surplus by $450 and decreases producer surplus by $300. The deadweight loss from the tax is

• A)$250.
• B)$500.
• C)$750.
• D)$1,000.

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Definitions:

Trailing Zeroes

Numbers at the end of a decimal number to the right of the last non-zero digit, often significant in precision measurements.

Multiplier

A factor by which another number is multiplied, often used in dosing calculations to adjust for patient weight or surface area.

Product

The result of multiplying two or more numbers or factors together.

Base

In chemistry, a base is a substance that can accept hydrogen ions or donate an electron pair in reactions.