Scenario 8-1 Erin Would Be Willing to Pay as Much as $100

Multiple Choice

Scenario 8-1
Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week.
-Refer to Scenario 8-1. Assume Erin is required to pay a tax of $40 when she hires someone to clean her house for a week. Which of the following is correct?

A) Erin will now clean her own house.
B) Ernesto will continue to clean Erin's house, but his producer surplus will decline.
C) Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase.
D) Erin will continue to hire Ernesto to clean her house, but her consumer surplus will decline.