Scenario 8-2
Tom mows Stephanie's lawn for $25.Tom's opportunity cost of mowing Stephanie's lawn is $20,and Stephanie's willingness to pay Tom to mow her lawn is $28.
-Refer to Scenario 8-2.Assume that Tom is required to pay a tax of $3 each time he mows a lawn.Which of the following results is most likely?

Question

Quizplus · Accepted Answer

With the tax, Tom's cost to mow Stephanie's lawn would increase to $23 ($20 opportunity cost + $3 tax). Stephanie's willingness to pay is still greater than Tom's cost, so they can still engage in a mutually-agreeable trade where Tom mows Stephanie's lawn for $28 and keeps $5 profit ($28 - $23 cost). Therefore, option D is the most likely outcome. Options A, B, and C are not valid as they assume that one party no longer wants to engage in the trade.

Scenario 8-2 Tom Mows Stephanie's Lawn for $25.Tom's Opportunity Cost of Mowing