Suppose There Is Only One Movie Theatre in a Town

Multiple Choice

Suppose there is only one movie theatre in a town and the equilibrium price and quantity for movie admissions is $7 and 940 visits per week.Now suppose the government imposes a tax of $3 per movie admission,and the new equilibrium price and quantity are $8.75 and 750 visits per week.What is the direct burden of this tax?

A) $937.50
B) $1312.50
C) $1645
D) $2250
E) There is not enough information to know.