8. John has been in the habit of mowing Willa's lawn each week for $20. John's opportunity cost is $15, and Willa would be willing to pay $25 to have her lawn mowed. What is the maximum tax the government can impose on lawn mowing without discouraging John and Willa from continuing their mutually beneficial arrangement

Question

Carter Velasquez

Business

20 September, 14:12

8. John has been in the habit of mowing Willa's lawn each week for $20. John's opportunity cost is $15, and Willa would be willing to pay $25 to have her lawn mowed. What is the maximum tax the government can impose on lawn mowing without discouraging John and Willa from continuing their mutually beneficial arrangement

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Seth Russo · Answer 1

Answer: The maximum tax the government should impose on lawn mowing without discouraging either of the party in the mutual benefit is a tax less than $10. That is form $9 to $1

A tax less than $10 is acceptable because the opportunity cost is $15 and the Price Willa can pay willingly is $25. This means that if the government should impose a tax of $9, John will be making a profit of $1 from the business, while Willa won't be discouraged because she pays what she is willing to pay.