Table 12-1

$$\begin{array} { | c | c | }
\hline \text { Person } & \begin{array} { c }
\text { Value of a White Water Rafting } \
\text { Trip } \
\text { (Dollars) }
\end{array} \
\hline \text { Ken } & 150 \
\hline \text { Alex } & 120 \
\hline \text { Brenda } & 90 \
\hline \text { Rob } & 60 \
\hline
\end{array}$$
-Refer to Table 12-1. Assume that the price of a white water rafting trip pass is $55 and that the price reflects the actual unit cost of the trip. Suppose the government imposes a tax of $12 on white water rafting, which raises the price to $67. The deadweight loss associated with the tax is
A)$5.
B)$41.
C)$164.
D)$123.

Question

Table 12-1
​
​
 $$\begin{array} { | c | c | } 
\hline \text { Person } & \begin{array} { c } 
\text { Value of a White Water Rafting } \
\text { Trip } \
\text { (Dollars) }
\end{array} \
\hline \text { Ken } & 150 \
\hline \text { Alex } & 120 \
\hline \text { Brenda } & 90 \
\hline \text { Rob } & 60 \
\hline
\end{array}$$
-Refer to Table 12-1. Assume that the price of a white water rafting trip pass is $55 and that the price reflects the actual unit cost of the trip. Suppose the government imposes a tax of $12 on white water rafting, which raises the price to $67. The deadweight loss associated with the tax is
A)$5.
B)$41.
C)$164.
D)$123.

Quizplus · Accepted Answer

The deadweight loss is calculated by identifying the transactions that no longer occur due to the tax. Before the tax, all four individuals would have purchased the trip since their valuations ($150, $120, $90, and $60) are all above the original price of $55. After the tax, the price increases to $67, which means Rob, whose valuation is $60, will no longer purchase the trip. The deadweight loss is the value of the lost transaction, which is the difference between Rob's valuation ($60) and the cost of the trip ($55), equaling $5.

Table 12-1 ​ ​ -Refer to Table 12-1

Table 12-1

-Refer to Table 12-1