Multiple Choice
Suppose Ashley needs a dog sitter so that she can travel to her sister's wedding.Ashley values dog sitting for the weekend at $200.Cami is willing to dog sit for Ashley so long as she receives at least $175.Ashley and Cami agree on a price of $185.Suppose the government imposes a tax of $30 on dog sitting.What is the deadweight loss of the tax?
A) the maximum value that Ashley would pay for dog sitting
B) the $30 tax
C) the lost benefit to Ashley and Cami because after the tax, Cami will not dog sit for Ashley
D) the lost benefit to Ashley of being unable to hire a dog sitter because Ashley is the one who would pay the tax
Correct Answer:
Verified
Correct Answer:
Verified
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