The inverse demand function for cantaloupes is defined by the equation p = 305 - 5q, where q is the number of units sold.The inverse supply function is defined by p = 8 + 4q.A tax of $45 is imposed on suppliers for each unit of cantaloupes that they sell.When the tax is imposed, the quantity of cantaloupes sold falls to
A)28.
B)33.
C)21.75.
D)26.
E)30.50.

Question

Quizplus · Accepted Answer

The correct answer is A.The tax of $45 per unit shifts the supply curve upward by $45, so the new supply curve is p = 53 + 4q. The equilibrium quantity is found by solving the new supply and demand curves:305 - 5q = 53 + 4q9q = 252q = 28Therefore, the quantity of cantaloupes sold falls to 28 when the tax is imposed.

The Inverse Demand Function for Cantaloupes Is Defined by the Equation