1896915/quizzes/3380310/take D Question 7 1 pts The equilibrium price of burrito

Question

1896915/quizzes/3380310/take D Question 7 1 pts The equilibrium price of burritos in Lexington is $8. At this price 800 burritos are sold in a day. A $2 dollar tax is then levied on burritos in Lexington. With this tax output is reduced to 600 burritos per day, sold at a price of $9. What is the deadweight loss of the tax? $5400 $600 $200 $1200 D Question 8 1 pts The equlibrium price of burritos in Lexington is $8. At this price 800 burritos are sold in a day. A $2 dollar tax is then levied on burritos in Lexington. With this tax output is reduced to 600 burritos per day, sold at a price of $9. What is the revenue generated by the tax? $5400 $600 $200 $1200

Explanation / Answer

Answer.)

Q7.) $200

Deadweight loss = (1/2)(800-600)($8 - $6) = $200

Q8.) $1200

Tax Revenue = Tax size x Output sold after tax imposed = $2 x 600 = $1200

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