Tom walks Bethany's dog once a day for $50 per week.Bethany values this service at $60 per week,while the opportunity cost of Tom's time is $30 per week.The government places a tax of $35 per week on dog walkers.Before the tax,what is the total surplus?
A)$60
B)$50
C)$30
D)$25

Question

Quizplus · Accepted Answer

Total surplus is calculated by subtracting the opportunity cost from the value of the service.

Bethany's value = $60 
Opportunity cost = $30 
Total surplus = $60 - $30 = $30

Since Tom charges $50, Bethany receives a surplus of $10 ($60 - $50), and Tom receives a surplus of $20 ($50 - $30). The tax of $35 per week would reduce the total surplus to -$5 ($30 - $35), making it unprofitable for both parties. Therefore, the best choice is for Tom to stop providing the service.

Tom Walks Bethany's Dog Once a Day for $50 Per