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.After the tax,what is the loss in total surplus?
A)$50
B)$30
C)$25
D)$0

Question

Quizplus · Accepted Answer

Before the tax, the total surplus was $10 ($60-$50) for Bethany and $20 ($50-$30) for Tom, for a total of $30. After the tax, Tom's cost to walk the dog is now $85 per week ($50 for Bethany, $35 for tax). Bethany is still willing to pay $60 per week, so Tom now incurs a loss of $25 per week ($60-$35-$50). The total surplus is now only $35 ($60-$25).

The best choice would be for Tom to stop walking the dog, as the tax has made it unprofitable for him to continue.

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