Microeconomics: Principles, Applications, and Tools (8th Edition)

by O'Sullivan, Arthur; Sheffrin, Steven; Perez, Stephen

Published by Prentice Hall

ISBN 10: 0-13294-886-9

ISBN 13: 978-0-13294-886-9

Chapter 16 - External Costs and Environmental Policy - Exercises - 16.3 Traditional Regulation - Page 374: 3.8b

Answer

6 songs \$30

Work Step by Step

With the \$4 tax we have: 1st song 9-4=5 2nd song 8-4=4 3rd song 7-4=3 4th song 6-4=2 5th song 5-4=1 6th song 4-4=0. Janis will play 6 songs. Consumer surplus (CS0) without tax: CS0=9+8+7+6+5+4+3+2+1=45 Consumer surplus (CS4) with tax: CS4=5+4+3+2+1=15 The loss in CS: 45-15=30

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