Question

In a competitive market with a linear upward-sloping supply curve and a linear downward-sloping demand curve, the government imposes a $10 tax per unit bought and sold. The tax causes the equilibrium quantity to fall from 89 units to 77 units. The deadweight :_______

Answer 1

$105

Step-by-step explanation:

Missing word "The deadweight loss of this tax is...?"

Change in price = $10

Original quantity = 89 units

New quantity = 77 unit

Change in quantity= 89 units-77 units = 12 units

Dead-weight loss = 1/2 * Change in price * Change in quantity

Dead-weight loss = 1/2 * $10 * $21

Dead-weight loss = $105

Therefore, the dead-weight loss of this tax is $105.