Suppose there is only one movie theatre in a town and the equilibrium price and quantity for movie admissions is $7 and 940 visits per week. Now suppose the government imposes a tax of $3 per movie admission, and the new equilibrium price and quantity are $8.75 and 750 visits per week. What is the direct burden of this tax?
A) $2250
B) $937.50
C) $1645
D) $1312.50
E) There is not enough information to know.
Correct Answer:
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