Mark, Danny, Kristin and Ruthie all love to ski at the local ski resort on weekends. Mark is the most avid skier and places a value of $85 on his weekend skiing. Danny, Kristin and Ruthie place values of $75, $65 and $40, respectively, on their weekend skiing experience. Assume that the price of a weekend ski pass is $38. Further assume that this price reflects the actual unit cost of providing a weekend of skiing.
-According to the information provided, if the government imposes a tax of $15 on each weekend ski pass, the deadweight loss associated with the tax is:

Question

Quizplus · Accepted Answer

The deadweight loss is the loss of consumer surplus for those who no longer purchase the ski pass due to the tax. With the tax, the price becomes $53 ($38 + $15). Ruthie, who values skiing at $40, will no longer buy the pass. The deadweight loss is the difference between Ruthie's value ($40) and the cost of providing the skiing ($38), which is $2.

Mark, Danny, Kristin and Ruthie All Love to Ski at the Local