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    Question

    Claudia would be willing to pay as much as $100 per week to have her house cleaned. John's opportunity cost of cleaning Claudia’s house is $70 per week. Assume Claudia is required to pay a tax of $40 when she hires someone to clean her house for a week. Which of the following is correct?

    A Claudia will now clean her own house Correct Answer Incorrect Answer
    B John will continue to clean Claudia’s house, but his producer surplus will decline. Correct Answer Incorrect Answer
    C Claudia will continue to hire John to clean her house, but her consumer surplus will decline. Correct Answer Incorrect Answer
    D Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase Correct Answer Incorrect Answer

    Solution

    Claudia cleans her own house as its beneficial to her compared to other alternatives.

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