Assume that Jane cleans Joe's house weekly for $80. Joe would be willing to pay as much as $100 weekly to have his house cleaned. Jane's opportunity cost is $70.
-According to the information provided, assume that Joe is required to pay a tax of $40 when he hires someone to clean his house. Which of the following is true?
A) Jane will continue to clean Joe's home, but consumer surplus will decline
B) Joe will now clean his own home
C) Jane will continue to cleans Joe's home but her producer surplus will decline
D) total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase
Correct Answer:
Verified
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