Scenario 8-1 Erin Would Be Willing to Pay as Much as $100

question 31

Multiple Choice

Scenario 8-1
Erin would be willing to pay as much as $100 per week to have her house cleaned.Ernesto's opportunity cost of cleaning Erin's house is $70 per week.
-Refer to Scenario 8-1.Assume Erin is required to pay a tax of $5 when she hires someone to clean her house.Which of the following is true?

• A)Erin will continue to hire Ernesto to clean her house,but her consumer surplus will decline.
• B)Ernesto will continue to clean Erin's house,and his producer surplus will increase.
• C)Total economic welfare (consumer surplus plus producer surplus plus tax revenue)will decrease.
• D)All of the above are correct.

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Definitions:

Nonsteroidal

Refers to drugs that are not steroids, often used to reduce inflammation or pain without the effects of steroids.

Glucagon

A hormone produced by the pancreas that raises blood glucose levels, acting as a critical counter-regulatory hormone to insulin.

Thyroid

A gland in the neck that produces hormones regulating growth and metabolism.

Adrenal

Pertaining to the adrenal glands, small glandular organs located above the kidneys that produce hormones like adrenaline and corticosteroids.