Assume the Supply Curve for Diapers Is a Typical,upward-Sloping Straight

question 56

Multiple Choice

Assume the supply curve for diapers is a typical,upward-sloping straight line,and the demand curve for diapers is a typical,downward-sloping straight line.Suppose the equilibrium quantity in the market for diapers is 1,000 per month when there is no tax.Then a tax of $0.50 per diaper is imposed.The effective price paid by buyers increases from $1.50 to $1.90 and the effective price received by sellers falls from $1.50 to $1.40.The government's tax revenue amounts to $475 per month.Which of the following statements is correct?

• A)After the tax is imposed,the equilibrium quantity of diapers is 900 per month.
• B)The demand for diapers is more elastic than the supply of diapers.
• C)The deadweight loss of the tax is $12.50.
• D)The tax causes a decrease in consumer surplus of $380.

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Definitions:

Market Development

Strategies or activities aimed at finding new markets or expanding existing ones for a product or service.

Diversification

A strategy for managing risk that diversifies a portfolio by incorporating a broad range of investments to reduce the effect of any single asset's performance.

Market Penetration

A measure of the extent to which a product or service is recognized and bought by customers within a particular market.

Market Development

Strategies or actions that seek to expand an existing product into new markets or demographic segments.