Final answer:
With the imposition of a $30 tax on dog sitting, Rebecca and Susan would both be worse off by the combined surplus of $25 they initially had without the tax, as the tax exceeds the surplus and disrupts the transaction.
Step-by-step explanation:
The question involves the impact of a tax on a market transaction between Rebecca and Susan, who had initially agreed upon a price for dog sitting. Initially, without the tax, the surplus for Rebecca would be the difference between what she values the service at ($200) and the agreed price ($185), which is $15. For Susan, the surplus is the difference between the agreed price ($185) and her minimum acceptable price ($175), which is $10. This results in a combined surplus of $25. When a $30 tax is imposed, it is likely that they will share the burden of the tax, but without specifics on how the tax is divided, we will consider it fully affects either party. If the full tax falls on Susan, she would receive $155 ($185 - $30), which is less than her minimum price of $175; thus, she would no longer agree to dog sit. If Rebecca bears the entire tax, she would effectively be paying $215 ($185 + $30), which is more than her valuation of $200, and she would not agree to the transaction. Regardless, the transaction would not occur due to the tax, making both parties worse off by the surplus they would have gained, which is the combined $25.