Scenario 8-1
Assume that Kierra cleans Cate's house weekly for $100.Cate would be willing to pay as much as $125 weekly to have her house cleaned.Kierra's opportunity cost is $80.
-Refer to Scenario 8-1.What would happen if Cate is required to pay a tax of $40 when she hires someone to clean her house
A)Cate will now clean her own house.
B)Kierra will continue to clean Cate's house but the producer surplus will decline.
C)Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase.
D)Kierra will continue to clean Cate's house, but the consumer surplus will decline.

Question

Quizplus · Accepted Answer

Cate would now have to pay $140 ($100 + $40 tax) to have her house cleaned, which exceeds her maximum willingness to pay of $125. Therefore, she will choose to clean her own house instead.

Scenario 8-1 Assume That Kierra Cleans Cate's House Weekly for $100.Cate Would