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John Has Been in the Habit of Mowing Willa's Lawn

Question 118

Essay

John has been in the habit of mowing Willa's lawn each week for $20. John's opportunity cost is $15, and Willa would be willing to pay $25 to have her lawn mowed. What is the maximum tax the government can impose on lawn mowing without discouraging John and Willa from continuing their mutually beneficial arrangement?

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If the tax is less than $10, there will ...

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