Question

Dan is a personal trainer whose client ben pays $60 per hour-long session. ben values this service at $80 per hour, while the opportunity cost of dan’ time is $50 per hour. the government places a tax of $20 per hour on personal trainers. after the tax, the total surplus i

Answer 1

The total surplus after the tax remains the same as before the tax.

Step-by-step explanation:

In this situation, the personal trainer Dan charges his client Ben $60 per hour-long session. Ben values this service at $80 per hour, while the opportunity cost of Dan's time is $50 per hour. The government imposes a tax of $20 per hour on personal trainers.

Before the tax, the total surplus can be calculated by subtracting the opportunity cost from the value that Ben places on the service. So, the total surplus would be $80 - $50 = $30 per hour. After the tax is imposed, the price that Ben pays increases to $60 + $20 = $80 per hour.

Therefore, the total surplus after the tax is $80 - $50 = $30 per hour, which is the same as before the tax.

The question cites economic concepts like consumer surplus, producer surplus, and price ceilings, explained through a scenario about a new drug and the effects of government-imposed price limits. It also highlights opportunity cost using a consultant's decision to buy vegetables instead of growing them.