The Inverse Demand Function for Lemons Is Defined by the Equation

question 19

Multiple Choice

The inverse demand function for lemons is defined by the equation p = 120 - 11q, where q is the number of crates that are sold.The inverse supply function is defined by p = 8 + 3q.In the past there was no tax on lemons but now a tax of $84 per crate has been imposed.What are the quantities produced before and after the tax was imposed?

• A)4 crates before and 3 crates after.
• B)8 crates before and 2 crates after.
• C)16 crates before and 5 crates after
• D)16 crates before and 5 crates after.
• E)None of the above.

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Definitions:

Perfect Income Equality

A hypothetical scenario where every individual or household in a society earns exactly the same income, eliminating any income disparity.

Lorenz Curve

A graphical representation of the distribution of income or of wealth within a population, highlighting inequalities.

Gini Ratio

An indicator of how income is distributed across a population, varying from 0 for total equality to 1 for absolute inequality.

Income Inequality

The disparity in income distribution across a group, causing variations in wealth and standards of living.