Question

Claudia would be willing to pay as much as $100 per week

Q: Answer-Claudia would be willing to pay as much as $100 per week to have her house cleaned. John's opportuni...

Claudia cleans her own house as its beneficial to her compared to other alternatives.

to have her house cleaned. John's opportunity cost of cleaning Claudia’s house is $70 per week. Assume Claudia is required to pay a tax of $40 when she hires someone to clean her house for a week. Which of the following is correct?

A Claudia will now clean her own house

B John will continue to clean Claudia’s house, but his producer surplus will decline.

C Claudia will continue to hire John to clean her house, but her consumer surplus will decline.

D Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase

E None of these

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Claudia would be willing to pay as much as $100 per week

Solution