What is the deadweight loss resulting from this tax?

Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter6: Supply, Demand And Government Policies
Section: Chapter Questions
Problem 7PA
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7. Daily demand for gasoline at Billy-Bob's Mobile Station is described by Q = 776 -
200p, where Q are gallons of gasoline sold and p is the price in dollars. Billy-Bob's
supply is Q = 2890 + 1,500p. Suppose the state government places a tax of 20 cents on
every gallon of gasoline sold. What is the deadweight loss resulting from this tax?
a. 3.53 dollars
b. 3.11 dollars
c. 0.42 dollars
d. 96.12 dollars
Transcribed Image Text:7. Daily demand for gasoline at Billy-Bob's Mobile Station is described by Q = 776 - 200p, where Q are gallons of gasoline sold and p is the price in dollars. Billy-Bob's supply is Q = 2890 + 1,500p. Suppose the state government places a tax of 20 cents on every gallon of gasoline sold. What is the deadweight loss resulting from this tax? a. 3.53 dollars b. 3.11 dollars c. 0.42 dollars d. 96.12 dollars
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