Athos, Porthos,and Aramis each like to take fencing lessons. The price of a fencing lesson is $11 . Athos values a lesson at $16, Porthos at $14, and Aramis at $12 . Suppose that if the government taxes fencing lessons at $2 each, the price will rise to $13 . A consequence of the tax is that consumer surplus shrinks by
a. $4 and tax revenues increase by $6, so there is a deadweight loss of $2.
b. $6 and tax revenues increase by $6, so there is no deadweight loss.
c. $5 and tax revenues increase by $6, so there is no deadweight loss.
d. $5 and tax revenues increase by $4, so there is a deadweight loss of $1.
d
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If the total money supply is $3 trillion, real GDP is $8 trillion and the price level is 1.5, then the equation of exchange tells us that velocity equals
A) 16. B) 3. C) 0.25. D) 4.
The graph illustrates the supply of soda. If the price of soda rises from $0.50 a can to $1.50 a can, the quantity of soda supplied
A) increases from 0 cans to 4,000 cans a day. B) decreases from 4,000 cans to 0 cans a day. C) remains unchanged because the supply increases not the quantity supplied. D) increases from 0 to 6,000 cans a day. E) remains unchanged because the supply decreases not the quantity supplied.