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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

Aiden gives piano lessons. He has an opportunity cost of $50 per lesson and charges $60. He has two students: Brandon, who has a willingness to pay of $/0, and Chloe, who has a willingness to pay of $90. When the government puts a $20 tax on piano lessons and Aiden raises his price to $80, the deadweight loss is ______ and the tax revenue is _______.

a. $10, $20

b. $10, $40

c. $20, $20

d. $20, $40

To determine
The concept of an efficient tax system and the reason that makes a tax system inefficient.

Explanation

Efficiency of a tax system: A tax system is said to be efficient if it imposes small administrative burden and small deadweight losses.

Reason for a tax system to be inefficient: The efficiency...

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