Asked by
Peter Wolter
on Oct 14, 2024
Verified
Ed has 100 tons of manure.The lowest price at which he is willing to sell it is $10 per ton.Fred wants to buy 100 tons of manure.The most he is willing to pay is $8 per ton.The federal government offers to subsidize manure sales at a rate of $1 per ton.If Ed and Fred are the only people who deal in manure, then the deadweight loss caused by the subsidy is
A) $100.
B) $50.
C) $0.
D) $200.
E) none of the above.
Deadweight Loss
A loss of economic efficiency that can occur when equilibrium is not achievable or not achieved in a market.
Subsidy
A financial contribution granted by the government or a public body to support businesses or consumers, making goods or services more affordable.
Manure
Organic matter, mainly derived from animal feces, used as fertilizer in agriculture.
- Understand the concept of deadweight loss in market transactions.
Verified Answer
JN
Learning Objectives
- Understand the concept of deadweight loss in market transactions.