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.

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Definitions:

Federal Reserve

The central banking system of the United States, responsible for monetary policy, regulation of banks, and providing financial services to depository institutions.

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Financial instruments issued by the United States Department of the Treasury to finance federal government spending, considered very low risk.

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is the level of output that an economy can produce when operating at a full employment level, where all available labor and resources are being used efficiently.

Government Securities

Financial instruments issued by the government to finance its expenditures, offering investors a relatively safe investment option compared to other securities.