In the market for widgets,the supply curve is the typical upward-sloping straight line,and the demand curve is the typical downward-sloping straight line.The equilibrium quantity in the market for widgets is 200 per month when there is no tax.Then a tax of $5 per widget is imposed.The price paid by buyers increases by $2 and the after-tax price received by sellers falls by $3.The government is able to raise $750 per month in revenue from the tax.The deadweight loss from the tax is
A)$250.
B)$125.
C)$75.
D)$50.

Question

Quizplus · Accepted Answer

The deadweight loss can be calculated using the formula: DWL = 0.5 * (Tax per unit) * (Reduction in quantity). The tax per unit is $5, and the reduction in quantity can be found by dividing the total tax revenue ($750) by the tax per unit ($5), which gives a reduction of 30 units. Therefore, DWL = 0.5 * $5 * 30 = $75.

In the Market for Widgets,the Supply Curve Is the Typical