Leonard, Sheldon, Raj, and Howard each like science fiction moves. The price of a special boxed set of Star Trek DVDs is $50. Leonard values the set of movies at $70, Sheldon at $65, Raj at $60, and Howard at $55. Suppose that if the government taxes DVDs at $10 each, the price rises to $60. A consequence of the tax is that consumer surplus shrinks by a. $50 and tax revenues increase by $30, so there is a deadweight loss of $20. b. 35 and tax revenues increase by $30, so there is a deadweight loss of $5. c. $20 and tax revenues increase by $20, so there is no deadweight loss. d. $15 and tax revenues increase by $20, so there is no deadweight loss. e. $40 and tax revenues increase by $40, so there is no deadweight loss.
Leonard, Sheldon, Raj, and Howard each like science fiction moves. The price of a special boxed set of Star Trek DVDs is $50. Leonard values the set of movies at $70, Sheldon at $65, Raj at $60, and Howard at $55. Suppose that if the government taxes DVDs at $10 each, the price rises to $60. A consequence of the tax is that consumer surplus shrinks by a. $50 and tax revenues increase by $30, so there is a deadweight loss of $20. b. 35 and tax revenues increase by $30, so there is a deadweight loss of $5. c. $20 and tax revenues increase by $20, so there is no deadweight loss. d. $15 and tax revenues increase by $20, so there is no deadweight loss. e. $40 and tax revenues increase by $40, so there is no deadweight loss.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Leonard, Sheldon, Raj, and Howard each like science fiction moves. The price of a special boxed set of Star Trek DVDs is $50. Leonard values the set of movies at $70, Sheldon at $65, Raj at $60, and Howard at $55. Suppose that if the government taxes DVDs at $10 each, the price rises to $60. A consequence of the tax is that consumer surplus shrinks by
a. $50 and tax revenues increase by $30, so there is a deadweight loss of $20.
b. 35 and tax revenues increase by $30, so there is a deadweight loss of $5.
c. $20 and tax revenues increase by $20, so there is no deadweight loss.
d. $15 and tax revenues increase by $20, so there is no deadweight loss.
e. $40 and tax revenues increase by $40, so there is no deadweight loss.
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