The following graph shows the market for the long-distance bus rides. In the absence of taxes, the equilibrium price of a ride is $5 and the equilibrium quantity is 10 million rides. Suppose that regulator levies an excise tax on bus service providers. The amount of excise tax equals $2 per ride. Calculate the amount of dead-weight loss resulting from this tax. $4 million $0.5 million $1 million $2 million
The following graph shows the market for the long-distance bus rides. In the absence of taxes, the equilibrium price of a ride is $5 and the equilibrium quantity is 10 million rides. Suppose that regulator levies an excise tax on bus service providers. The amount of excise tax equals $2 per ride. Calculate the amount of dead-weight loss resulting from this tax. $4 million $0.5 million $1 million $2 million
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter2: The One Lesson Of Business
Section: Chapter Questions
Problem 2.1IP
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Question
The following graph shows the market for the long-distance bus rides. In the absence of taxes, the
$4 million
|
||
$0.5 million
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||
$1 million
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||
$2 million
|
![Price
(per ride)
$7.50
S
7.00
6.50
6.00
5.50
E
5.00
4.50
4.00
3.50
3.00
D
2.50
2.00
6 7 8 9 10 11 12 13 14 15
Quantity (millions of rides per year)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbc204b97-3aec-4a0e-8ada-b23a26b2fcfe%2F67c342af-78c0-482a-9804-63be613f3879%2Fzzcnl8_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Price
(per ride)
$7.50
S
7.00
6.50
6.00
5.50
E
5.00
4.50
4.00
3.50
3.00
D
2.50
2.00
6 7 8 9 10 11 12 13 14 15
Quantity (millions of rides per year)
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