Paul Owns a Home on the Top of a Hill

question 11

Multiple Choice

Paul owns a home on the top of a hill and enjoys an unobstructed view of a large wooded area.The view was a large factor in his decision to buy the house and Paul values his view at $5000 per month.Sid purchases the undeveloped wooded area with plans to build a retail shopping centre.Sid expects to earn $10,000 a month from the shopping centre,which is $3000 more than his next best alternative.
-Refer to the information above.Suppose that Paul rejects the idea of either buying the undeveloped land or paying Sid not to develop the land,and successfully blocks Sid from developing the land by getting the zoning law changed.As a result,

• A) Paul's economic surplus will rise.
• B) Sid's economic surplus will rise.
• C) Paul's economic surplus is unchanged.
• D) Sid is no worse off.
• E) society is better off.

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Definitions:

Itemized Deductions

Deductions from taxable income that are enumerated and individually taken, as opposed to taking a standard deduction. These can include expenses for healthcare, taxes paid, interest expenses, and charitable contributions.

State Income Taxes

Taxes levied by individual states on the income of residents and sometimes non-residents earning income within the state.

Schedule A

A form used by U.S. taxpayers to itemize deductions on their federal income tax return.

Uniforms

Uniforms are specific sets of clothing worn by members of the same organization or employees of a particular company, often required for identification or to maintain a professional appearance.