Question

A television costs $100, but a new excise tax law imposes a $5 tax on the sale of the set. If Takeshi wants to buy a television, what would have to be his minimum willingness to pay?
a. between $100 and $105

b. $105

c. more than $105

d. $100

Answer 1

Answer:

The correct answer is option (A).

Explanation:

According to the scenario, the given data are as follows:

Television cost = $100

Tax imposed = $5

So, we can calculate the minimum willingness to pay to buy television can be concluded by taking following observation:

• As the minimum amount of the television without taxes is $100 So, the minimum amount we will take is $100.
• While after new excise tax law the maximum amount that should be payable to buy television is ($100 + $5 = $105) $105. So, the maximum amount we will take is $105.

Hence, the amount that should be pay to buy the television should be between $100 and $105.