The economist Bryan Caplan recently found a pair of $10 arch supports that saved him from the pain of major foot surgery. As he stated on is blog (econlog.econlib.org), he would have been willing to pay $100,000 to fix his foot problem, but instead he paid only a few dollars.
a. How much consumer surplus did Bryan enjoy from this purchase?
b. If the sales tax was 5 percent on this product, how much revenue did the government raise when Bryan bought his arch supports?
c. If the government could have taxed Bryan based on his willingness to pay rather than on how much he actually paid, how much sales tax would Bryan have had to pay?