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Consider a Perfectly Competitive Market with Inverse Market Supply P=5+3QsP = 5 + 3 Q ^ { s }

Question 1

Multiple Choice

Consider a perfectly competitive market with inverse market supply P=5+3QsP = 5 + 3 Q ^ { s } and inverse market demand P=502QdP = 50 - 2 Q ^ { d } . Suppose the government subsidizes this market with a subsidy of $5\$ 5 per unit. What is the deadweight loss resulting from the subsidy?


A) 0, subsidies do not have a deadweight loss
B) 2.5
C) 5
D) 7.5

Correct Answer:

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