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Welcome to the Q&A for ECN/APEC 2010, where you can ask questions and receive answers from your fellow students, the TA, and your professor.

Please only ask questions about the material for the course. Try to create discussions about the material we see in class, instead of just thinking of economics in general (this is an introduction to microeconomics class, not a policy or government class).

For questions and discussions about course organization or other course related topics, come see us after class or during office hours.

Feel free to discuss quiz questions on the Q&A, but do not provide direct answers to quiz questions before the quiz's due date.

practice quiz 6; not graded.

+6 votes
19 views

Every summer, Matt travels by air to see his grandmother. Matt's maximum willingness to pay for an airline ticket is $260, but the airline only requires a minimum of $100 to fly him. Normally, Matt pays the airline the going market price of $250 per ticket. If the government places a $50 tax on each ticket, raising ticket prices to $270, and causing Matt not to go, what is the deadweight loss created by this tax?

how would you calculate the response? 

asked Apr 9 by canvas-e415876b4fe9a (251 points)

1 Answer

+3 votes
Before the tax when the transaction takes place, he has a consumer surplus of $10 dollars. WTP $260 - How much he paid $250. $260-$250= $10

Also the Airline had a surplus of $150 because their WTS was $100 and they usually sold it for $250. $250-$100=$150

Total Surplus of the transaction was Matt's $10+$150 (Airlines surplus) Which gives you $160 surplus that was all lost when the transaction didn't occur because of the tax
answered Apr 9 by canvas-23d18cde7cf42 (265 points)
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