Diana Is a Personal Trainer Whose Client Charles Pays $80

question 50

Multiple Choice

Diana is a personal trainer whose client Charles pays $80 per hour-long session.Charles values this service at $100 per hour,while the opportunity cost of Diana's time is $75 per hour.The government places a tax of $10 per hour on personal trainers.After the tax,what is likely to happen in the market for personal training?

• A) Diana and Charles will agree to a new price somewhere between $85 and $100.
• B) Diana and Charles will agree to a new price somewhere between $70 and $110.
• C) Diana will no longer offer personal training services to Charles because she must charge more than $100 in order to cover her opportunity costs and pay the tax.
• D) The price will remain at $80, and Diana will pay the $10 tax.