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Question: Zoe, Chloe, and Brody each like to read The current bestseller costs $11. Zoe values it at $16, Chloe at $14, and Brody at $12. Suppose that if the government taxes books at $2 each, the selling price will rise to $13. A consequence of the tax is that

a. consumer surplus shrinks by $4 and tax revenues increase by $6, so there is a deadweight loss of $2.

b. consumer surplus shrinks by $6 and tax revenues increase by $6, so there is no deadweight loss.

c. consumer surplus shrinks by $5 and tax revenues increase by $6, so there is no deadweight loss.

d. consumer surplus shrinks by $5 and tax revenues increase by $4, so there is a deadweight loss of $1.

Basic Finance, Finance

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