Question

For automotive oil, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. A tax of $1.50 per imposed on automotive oil The tax reduces the equilibrium quantity in the market by 50 units. The deadweight loss from the tax

a. $750

b. $650

c. $375

d. $333

Answer 1

When a tax is imposed on automotive oil, it causes a decrease in the equilibrium quantity, resulting in a deadweight loss.

Step-by-step explanation:

The subject of this question is Economics. When a tax is imposed on automotive oil, it will increase the cost of production for producers. As a result, the supply curve will shift upwards, causing a decrease in the equilibrium quantity. The deadweight loss from the tax can be calculated by finding the area between the new supply curve and the initial supply curve. In this case, the deadweight loss is equal to the tax rate multiplied by the change in quantity, which is $1.50 multiplied by 50 units, resulting in a deadweight loss of $75. Therefore, the correct answer is c. $375.