Suppose that a local government has imposed a quota of 0.5 million gallons on water usage. Before the quota is enforced, the market demand curve is given by
QD = 10 - 2.25P
And the market supply curve is given by
QS = -10 + 2.75P
Where the quantity is measured in millions of gallons per month and the price is in dollars per thousand gallons. The deadweight loss as a result of the quota is ____.
A) $1,000
B) $500,000
C) $1,500
D) $1,605
Correct Answer:
Verified
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