Question

Suppose that Bob places a value of $10 on a movie ticket and that Lisa places a value of $7 on a movie ticket. In addition, suppose the price of a movie ticket is $5. 15. Refer to Scenario 12-2. Suppose the government levies a tax of $3 on a movie ticket and that, as a result, the price of a movie ticket increases to $8. What is total consumer surplus after the tax is imposed?

Answer 1

Answer:

$1

Explanation:

We can use the simple consumer surplus formula:

Consumer surplus = Maximum Price Willing to Pay - Actual Price

For Bob

Consumer Surplus = $10 - $8

                              = $2

For Lisa

Consumer Surplus = $7-8

                               = $-1

So, the total consumer surplus is $1