Mary values a movie at $15 while Tim values it at $10.The price of the movie is $9.If the government imposes a $2 tax per movie and the price of a movie rises to $11,what part of the deadweight loss comes from Mary and what part comes from Tim?
A) none comes from Mary, $1 comes from Tim
B) none comes from Mary, $3 comes from Tim
C) $2 comes from Mary, $1 comes from Tim
D) $4 comes from Mary, $3 comes from Tim

Question

Quizplus · Accepted Answer

The deadweight loss is the loss of consumer surplus and producer surplus that results from a tax. In this case, the tax is $2 per movie, and the price of a movie rises from $9 to $11. The deadweight loss is the area of the triangle formed by the demand curve, the supply curve, and the new price of $11.The part of the deadweight loss that comes from Mary is the area of the triangle below the demand curve and above the price of $11. This area is equal to $2. The part of the deadweight loss that comes from Tim is the area of the triangle below the demand curve and above the price of $10. This area is equal to $1.

Mary Values a Movie at $15 While Tim Values It