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-(Table: Demand for Lenny's Coffee) Look at the table Demand for Lenny's Coffee. Lenny's Café is the only source of coffee for hundreds of miles in any direction. If Lenny's marginal cost of selling coffee is a constant $2 and the government forces Lenny to charge a price that eliminates deadweight loss, Lenny will charge _____ per cup and sell _____ cups.
A) $0; 10
B) $2; 8
C) $4; 6
D) $5; 5

Question

Use the following to answer questions: 
-(Table: Demand for Lenny's Coffee) Look at the table Demand for Lenny's Coffee. Lenny's Café is the only source of coffee for hundreds of miles in any direction. If Lenny's marginal cost of selling coffee is a constant $2 and the government forces Lenny to charge a price that eliminates deadweight loss, Lenny will charge _____ per cup and sell _____ cups.
A) $0; 10 
B) $2; 8 
C) $4; 6 
D) $5; 5

Quizplus · Accepted Answer

To eliminate deadweight loss, Lenny should charge a price equal to the marginal cost, which is $2. At this price, the quantity demanded is 8 cups.

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