Scenario 8-1
Ryan would be willing to pay as much as $100 per week to have his house cleaned. Tammy's opportunity cost of cleaning Ryan's house is $70 per week.
-Refer to Scenario 8-1.Assume Ryan is required to pay a tax of $40 when he hires someone to clean his house for a week.Which of the following is correct?
A) Ryan will now clean his own house.
B) Tammy will continue to clean Ryan's house but her producer surplus will decline.
C) Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase.
D) Ryan will continue to hire Tammy to clean his house but his consumer surplus will decline.
Correct Answer:
Verified
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