Scenario 12-1
Suppose Jim and Joan receive great satisfaction from their consumption of cheesecake.Joan would be willing to purchase only one slice and would pay up to $6 for it.Jim would be willing to pay $9 for his first slice,$7 for his second slice,and $3 for his third slice.The current market price is $3 per slice.
-Refer to Scenario 12-1.Assume that the government places a $4 tax on each slice of cheesecake and that the new equilibrium price is $7.What is the deadweight loss of the tax?
A) $3
B) $6
C) $8
D) $9

Question

Quizplus · Accepted Answer

The Answer of Scenario 12-1
Suppose Jim and Joan receive great satisfaction from their consumption of cheesecake.Joan would be willing to purchase only one slice and would pay up to $6 for it.Jim would be willing to pay $9 for his first slice,$7 for his second slice,and $3 for his third slice.The current market price is $3 per slice.
-Refer to Scenario 12-1.Assume that the government places a $4 tax on each slice of cheesecake and that the new equilibrium price is $7.What is the deadweight loss of the tax?
A) $3
B) $6
C) $8
D) $9

Scenario 12-1 Suppose Jim and Joan Receive Great Satisfaction from Their Consumption