Question

Suppose Yolanda needs a dog sitter so that she can travel to her sister's wedding. Yolanda values dog sitting for the weekend at $200. Rebecca is willing to dog sit for Yolanda so long as she receives at least $175. Yolanda and Rebecca agree on a price of $185. Suppose the government imposes a tax of $30 on dog sitting. What is the deadweight loss of the tax

Answer 1

Answer:

$25

Explanation:

Willingness to pay is the highest amount a consumer is willing to pay for a service

A tax is a compulsory sum levied on goods and services by the government. Taxes increases the price of goods

deadweight loss of the tax is the reduction in demand or efficiency as a result of tax