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NATIONAL FEDERATION OF INDEPENDENT BUSINESS et al. v.

SEBELIUS, SECRETARY OF HEALTH AND HUMAN SERVICES, et al.

certiorari to the united states court of appeals for the eleventh circuit

Decided June 28, 2012

Chief Justice Roberts announced the judgment of the Court.....

Today we resolve constitutional challenges to two provisions of the Patient Protection and Affordable Care Act of 2010: the individual mandate, which requires individuals to purchase a health insurance policy providing a minimum level of coverage; and the Medicaid expansion, which gives funds to the States on the condition that they provide specified health care to all citizens whose income falls below a certain threshold. We do not consider whether the Act embodies sound policies. That judgment is entrusted to the Nation's elected leaders. We ask only whether Congress has the power under the Constitution to enact the challenged provisions....

This case concerns two powers that the Constitution does grant the Federal Government, but which must be read carefully to avoid creating a general federal authority akin to the police power. The Constitution authorizes Congress to "regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes...."

Congress may also "lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States." U. S. Const., Art. I, 8, cl. 1. Put simply, Congress may tax and spend. This grant gives the Federal Government considerable influence even in areas where it cannot directly regulate. The Federal Government may enact a tax on an activity that it cannot authorize, forbid, or otherwise control. And in exercising its spending power, Congress may offer funds to the States, and may condition those offers on compliance with specified conditions.These offers may well induce the States to adopt policies that the Federal Government itself could not impose.

The reach of the Federal Government's enumerated powers is broader still because the Constitution authorizes Congress to "make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers." We have long read this provision to give Congress great latitude in exercising its powers: "Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the constitution, are constitutional."

Our permissive reading of these powers is explained in part by a general reticence to invalidate the acts of the Nation's elected leaders. "Proper respect for a co-ordinate branch of the government" requires that we strike down an Act of Congress only if "the lack of constitutional authority to pass [the] act in question is clearly demonstrated." Members of this Court are vested with the authority to interpret the law; we possess neither the expertise nor the prerogative to make policy judgments. Those decisions are entrusted to our Nation's elected leaders, who can be thrown out of office if the people disagree with them. It is not our job to protect the people from the consequences of their political choices.

Our deference in matters of policy cannot, however, become abdication in matters of law. "The powers of the legislature are defined and limited; and that those limits may not be mistaken, or forgotten, the constitution is written." Marbury v. Madison, 1 Cranch 137, 176 (1803). Our respect for Congress's policy judgments thus can never extend so far as to disavow restraints on federal power that the Constitution carefully constructed. "The peculiar circumstances of the moment may render a measure more or less wise, but cannot render it more or less constitutional."

The questions before us must be considered against the background of these basic principles.

I

In 2010, Congress enacted the Patient Protection and Affordable Care Act, 124 Stat. 119. The Act aims to increase the number of Americans covered by health insurance and decrease the cost of health care. The Act's 10 titles stretch out and contain hundreds of provisions. This case concerns constitutional challenges to two key provisions, commonly referred to as the individual mandate and the Medicaid expansion.

The individual mandate requires most Americans to maintain "minimum essential" health insurance coverage. 26 U. S. C. 5000A. Many individuals will receive the required coverage through their employer, or from a government program such as Medicaid or Medicare. But for individuals who are not exempt and do not receive health insurance through a third party, the means of satisfying the requirement is to purchase insurance from a private company.

Beginning in 2014, those who do not comply with the mandate must make a "[s]hared responsibility payment" to the Federal Government. That payment, which the Act describes as a "penalty," is calculated as a percentage of household income, subject to a floor based on a specified dollar amount and a ceiling based on the average annual premium the individual would have to pay for qualifying private health insurance. 5000A(c). In 2016, for example, the penalty will be 2.5 percent of an individual's household income, but no less than $695 and no more than the average yearly premium for insurance that covers 60 percent of the cost of 10 specified services (e.g., prescription drugs and hospitalization). The Act provides that the penalty will be paid to the Internal Revenue Service with an individual's taxes, and "shall be assessed and collected in the same manner" as tax penalties, such as the penalty for claiming too large an income tax refund. The Act, however, bars the IRS from using several of its normal enforcement tools, such as criminal prosecutions and levies. And some individuals who are subject to the mandate are nonetheless exempt from the penalty--for example, those with income below a certain threshold and members of Indian tribes....

We granted certiorari to review the judgment of the Court of Appeals for the Eleventh Circuit with respect to both the individual mandate and the Medicaid expansion....

III

The Government advances two theories for the proposition that Congress had constitutional authority to enact the individual mandate. First, the Government argues that Congress had the power to enact the mandate under the Commerce Clause. Under that theory, Congress may order individuals to buy health insurance because the failure to do so affects interstate commerce, and could undercut the Affordable Care Act's other reforms. Second, the Government argues that if the commerce power does not support the mandate, we should nonetheless uphold it as an exercise of Congress's power to tax. According to the Government, even if Congress lacks the power to direct individuals to buy insurance, the only effect of the individual mandate is to raise taxes on those who do not do so, and thus the law may be upheld as a tax....

The individual mandate forces individuals into commerce precisely because they elected to refrain from commercial activity. Such a law cannot be sustained under a clause authorizing Congress to regulate Commerce....

That is not the end of the matter. Because the Commerce Clause does not support the individual mandate, it is necessary to turn to the Government's second argument: that the mandate may be upheld as within Congress's enumerated power to "lay and collect Taxes." Art. I, 8, cl. 1.

The Government's tax power argument asks us to view the statute differently than we did in considering its commerce power theory. In making its Commerce Clause argument, the Government defended the mandate as a regulation requiring individuals to purchase health insurance. The Government does not claim that the taxing power allows Congress to issue such a command. Instead, the Government asks us to read the mandate not as ordering individuals to buy insurance, but rather as imposing a tax on those who do not buy that product.

The text of a statute can sometimes have more than one possible meaning. To take a familiar example, a law that reads "no vehicles in the park" might, or might not, ban bicycles in the park. And it is well established that if a statute has two possible meanings, one of which violates the Constitution, courts should adopt the meaning that does not do so. Justice Story said that 180 years ago: "No court ought, unless the terms of an act rendered it unavoidable, to give a construction to it which should involve a violation, however unintentional, of the constitution." Justice Holmes made the same point a century later: "[T]he rule is settled that as between two possible interpretations of a statute, by one of which it would be unconstitutional and by the other valid, our plain duty is to adopt that which will save the Act."

The most straightforward reading of the mandate is that it commands individuals to purchase insurance. After all, it states that individuals "shall" maintain health insurance. Congress thought it could enact such a command under the Commerce Clause, and the Government primarily defended the law on that basis. But, for the reasons explained above, the Commerce Clause does not give Congress that power. Under our precedent, it is therefore necessary to ask whether the Government's alternative reading of the statute--that it only imposes a tax on those without insurance--is a reasonable one.

Under the mandate, if an individual does not maintain health insurance, the only consequence is that he must make an additional payment to the IRS when he pays his taxes. That, according to the Government, means the mandate can be regarded as establishing a condition--not owning health insurance--that triggers a tax--the required payment to the IRS. Under that theory, the mandate is not a legal command to buy insurance. Rather, it makes going without insurance just another thing the Government taxes, like buying gasoline or earning income. And if the mandate is in effect just a tax hike on certain taxpayers who do not have health insurance, it may be within Congress's constitutional power to tax.

The question is not whether that is the most natural interpretation of the mandate, but only whether it is a "fairly possible" one. As we have explained, "every reasonable construction must be resorted to, in order to save a statute from unconstitutionality." The Government asks us to interpret the mandate as imposing a tax, if it would otherwise violate the Constitution. Granting the Act the full measure of deference owed to federal statutes, it can be so read, for the reasons set forth below.

The exaction the Affordable Care Act imposes on those without health insurance looks like a tax in many respects. The "[s]hared responsibility payment," as the statute entitles it, is paid into the Treasury by "taxpayer[s]" when they file their tax returns. It does not apply to individuals who do not pay federal income taxes because their household income is less than the filing threshold in the Internal Revenue Code. For taxpayers who do owe the payment, its amount is determined by such familiar factors as taxable income, number of dependents, and joint filing status. The requirement to pay is found in the Internal Revenue Code and enforced by the IRS, which--as we previously explained--must assess and collect it "in the same manner as taxes." This process yields the essential feature of any tax: it produces at least some revenue for the Government....

It is of course true that the Act describes the payment as a "penalty," not a "tax." But while that label is fatal to the application of the Anti-Injunction Act, it does not determine whether the payment may be viewed as an exercise of Congress's taxing power. It is up to Congress whether to apply the Anti-Injunction Act to any particular statute, so it makes sense to be guided by Congress's choice of label on that question. That choice does not, however, control whether an exaction is within Congress's constitutional power to tax....

We have similarly held that exactions not labeled taxes nonetheless were authorized by Congress's power to tax. In the License Tax Cases, for example, we held that federal licenses to sell liquor and lottery tickets--for which the licensee had to pay a fee--could be sustained as exercises of the taxing power....Our cases confirm this functional approach.....

The same analysis here suggests that the shared responsibility payment may for constitutional purposes be considered a tax, not a penalty: First, for most Americans the amount due will be far less than the price of insurance, and, by statute, it can never be more. It may often be a reasonable financial decision to make the payment rather than purchase insurance, unlike the "prohibitory" financial punishment in Drexel Furniture. Second, the individual mandate contains no scienter requirement. Third, the payment is collected solely by the IRS through the normal means of taxation--except that the Service is not allowed to use those means most suggestive of a punitive sanction, such as criminal prosecution. The reasons the Court in Drexel Furniture held that what was called a "tax" there was a penalty support the conclusion that what is called a "penalty" here may be viewed as a tax.

None of this is to say that the payment is not intended to affect individual conduct. Although the payment will raise considerable revenue, it is plainly designed to expand health insurance coverage. But taxes that seek to influence conduct are nothing new. Some of our earliest federal taxes sought to deter the purchase of imported manufactured goods in order to foster the growth of domestic industry. Today, federal and state taxes can compose more than half the retail price of cigarettes, not just to raise more money, but to encourage people to quit smoking. And we have upheld such obviously regulatory measures as taxes on selling marijuana and sawed-off shotguns. Indeed, "[e]very tax is in some measure regulatory. To some extent it interposes an economic impediment to the activity taxed as compared with others not taxed." That 5000A seeks to shape decisions about whether to buy health insurance does not mean that it cannot be a valid exercise of the taxing power.

In distinguishing penalties from taxes, this Court has explained that "if the concept of penalty means anything, it means punishment for an unlawful act or omission." While the individual mandate clearly aims to induce the purchase of health insurance, it need not be read to declare that failing to do so is unlawful. Neither the Act nor any other law attaches negative legal consequences to not buying health insurance, beyond requiring a payment to the IRS. The Government agrees with that reading, confirming that if someone chooses to pay rather than obtain health insurance, they have fully complied with the law.

Indeed, it is estimated that four million people each year will choose to pay the IRS rather than buy insurance. We would expect Congress to be troubled by that prospect if such conduct were unlawful. That Congress apparently regards such extensive failure to comply with the mandate as tolerable suggests that Congress did not think it was creating four million outlaws. It suggests instead that the shared responsibility payment merely imposes a tax citizens may lawfully choose to pay in lieu of buying health insurance.

The plaintiffs contend that Congress's choice of language--stating that individuals "shall" obtain insurance or pay a "penalty"--requires reading 5000A as punishing unlawful conduct, even if that interpretation would render the law unconstitutional. We have rejected a similar argument before....

The joint dissenters argue that we cannot uphold 5000A as a tax because Congress did not "frame" it as such. In effect, they contend that even if the Constitution permits Congress to do exactly what we interpret this statute to do, the law must be struck down because Congress used the wrong labels. An example may help illustrate why labels should not control here. Suppose Congress enacted a statute providing that every taxpayer who owns a house without energy efficient windows must pay $50 to the IRS. The amount due is adjusted based on factors such as taxable income and joint filing status, and is paid along with the taxpayer's income tax return. Those whose income is below the filing threshold need not pay. The required payment is not called a "tax," a "penalty," or anything else. No one would doubt that this law imposed a tax, and was within Congress's power to tax. That conclusion should not change simply because Congress used the word "penalty" to describe the payment. Interpreting such a law to be a tax would hardly "[i]mpos[e] a tax through judicial legislation." Rather, it would give practical effect to the Legislature's enactment.

Our precedent demonstrates that Congress had the power to impose the exaction in 5000A under the taxing power, and that 5000A need not be read to do more than impose a tax. That is sufficient to sustain it. The "question of the constitutionality of action taken by Congress does not depend on recitals of the power which it undertakes to exercise."

....There may, however, be a more fundamental objection to a tax on those who lack health insurance. Even if only a tax, the payment under 5000A(b) remains a burden that the Federal Government imposes for an omission, not an act. If it is troubling to interpret the Commerce Clause as authorizing Congress to regulate those who abstain from commerce, perhaps it should be similarly troubling to permit Congress to impose a tax for not doing something.

Three considerations allay this concern. First, and most importantly, it is abundantly clear the Constitution does not guarantee that individuals may avoid taxation through inactivity. A capitation, after all, is a tax that everyone must pay simply for existing, and capitations are expressly contemplated by the Constitution. The Court today holds that our Constitution protects us from federal regulation under the Commerce Clause so long as we abstain from the regulated activity. But from its creation, the Constitution has made no such promise with respect to taxes.

Whether the mandate can be upheld under the Commerce Clause is a question about the scope of federal authority. Its answer depends on whether Congress can exercise what all acknowledge to be the novel course of directing individuals to purchase insurance. Congress's use of the Taxing Clause to encourage buying something is, by contrast, not new. Tax incentives already promote, for example, purchasing homes and professional educations. Sustaining the mandate as a tax depends only on whether Congress has properly exercised its taxing power to encourage purchasing health insurance, not whether it can. Upholding the individual mandate under the Taxing Clause thus does not recognize any new federal power. It determines that Congress has used an existing one.

Second, Congress's ability to use its taxing power to influence conduct is not without limits. A few of our cases policed these limits aggressively, invalidating punitive exactions obviously designed to regulate behavior otherwise regarded at the time as beyond federal authority. More often and more recently we have declined to closely examine the regulatory motive or effect of revenue-raising measures. We have nonetheless maintained that " 'there comes a time in the extension of the penalizing features of the so-called tax when it loses its character as such and becomes a mere penalty with the characteristics of regulation and punishment.' "

....Third, although the breadth of Congress's power to tax is greater than its power to regulate commerce, the taxing power does not give Congress the same degree of control over individual behavior. Once we recognize that Congress may regulate a particular decision under the Commerce Clause, the Federal Government can bring its full weight to bear. Congress may simply command individuals to undertake it directly. An individual who disobeys may be subjected to criminal sanctions. Those sanctions can include not only fines and imprisonment, but all the attendant consequences of being branded a criminal: deprivation of otherwise protected civil rights, such as the right to bear arms or vote in elections; loss of employment opportunities; social stigma; and severe disabilities in other controversies, such as custody or immigration disputes.

By contrast, Congress's authority under the taxing power is limited to requiring an individual to pay money into the Federal Treasury, no more. If a tax is properly paid, the Government has no power to compel or punish individuals subject to it. We do not make light of the severe burden that taxation--especially taxation motivated by a regulatory purpose--can impose. But imposition of a tax nonetheless leaves an individual with a lawful choice to do or not perform certain act, so long as he is willing to pay a tax levied on that choice.

The Affordable Care Act's requirement that certain in-dividuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax. Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.

Justice Scalia, Justice Kennedy, Justice Thomas, and Justice Alito, dissenting.

As far as 5000A is concerned, we would stop there. Congress has attempted to regulate beyond the scope of its Commerce Clause authority, and 5000A is therefore invalid. The Government contends, however, as expressed in the caption to Part II of its brief, that "the minimum coverage provision is independently authorized by congress's taxing power." The phrase "independently authorized" suggests the existence of a creature never hitherto seen in the United States Reports: A penalty for constitutional purposes that is also a tax for constitutional purposes. In all our cases the two are mutually exclusive. The provision challenged under the Constitution is either a penalty or else a tax. Of course in many cases what was a regulatory mandate enforced by a penalty could have been imposed as a tax upon permissible action; or what was imposed as a tax upon permissible action could have been a regulatory mandate enforced by a penalty. But we know of no case, and the Government cites none, in which the imposition was, for constitutional purposes, both. The two are mutually exclusive. Thus, what the Government's caption should have read was "alternatively, the minimum coverage provision is not a mandate-with-penalty but a tax." It is important to bear this in mind in evaluating the tax argument of the Government and of those who support it: The issue is not whether Congress had the power to frame the minimum-coverage provision as a tax, but whether it did so....

That 5000A imposes not a simple tax but a mandate to which a penalty is attached is demonstrated by the fact that some are exempt from the tax who are not exempt from the mandate--a distinction that would makes no sense if the mandate were not a mandate....

The last of the feeble arguments in favor of petitioners that we will address is the contention that what this statute repeatedly calls a penalty is in fact a tax because it contains no scienter requirement. The presence of such a requirement suggests a penalty--though one can imagine a tax imposed only on willful action; but the absence of such a requirement does not suggest a tax. Penalties for absolute-liability offenses are commonplace. And where a statute is silent as to scienter, we traditionally presume a mens rea requirement if the statute imposes a "severe penalty."

And the nail in the coffin is that the mandate and penalty are located in Title I of the Act, its operative core, rather than where a tax would be found--in Title IX, containing the Act's "Revenue Provisions." In sum, "the terms of [the] act rende[r] it unavoidable," that Congress imposed a regulatory penalty, not a tax.

For all these reasons, to say that the Individual Mandate merely imposes a tax is not to interpret the statute but to rewrite it. Judicial tax-writing is particularly troubling. Taxes have never been popular, and in part for that reason, the Constitution requires tax increases to originate in the House of Representatives. That is to say, they must originate in the legislative body most accountable to the people, where legislators must weigh the need for the tax against the terrible price they might pay at their next election, which is never more than two years off....Imposing a tax through judicial legislation inverts the constitutional scheme, and places the power to tax in the branch of government least accountable to the citizenry....

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Question 2 It is intuitive to think that the presence of more agents in the economy "shrinks" its core, since there are more coalitions that can object a given allocation. You will understand in this question why this is indeed the case.' Fix a standard, two-person exchange economy & = ((u', w' ), (u', w?)). Define its replica as the four-person exchange economy 82 = ((u', w'), (ul, w ), (u', w'), (u', wa)). where (u', w3) = (u', wi ) and (u', wi ) = (uz, w? ). 1. Argue that if (p, x', x?) is a competitive equilibrium for &, then (p, x', x3, x3, x* ) with x' = x' and x* = x', is an equilibrium for &?. 2. Argue that if both utility functions are strictly quasi-concave, and (p, x', x', x3, x* ) is a competitive equilibrium for &', then, x' = x3 and x? = x*. 3. Argue that if both utility functions are strictly quasi-concave, and (x], x3, x3, x* ) is in the core of &', then, x' = x3 and x? = x*. 4. Argue that if both utility functions are monotone and strictly quasi-concave, and (p, x', x?) is a competitive equilibrium for &, then (x], x], x', x?) is in the core of &?. 5. Suppose that u'(x) = u'(x) =x'x. wi = (1,0) and w2 = (0, 1). Argue that allocation ((0, 0), (1, 1) ) is in the core of &, yet allocation ((0, 0), (1, 1), (0, 0), (1, 1)) is not in the core of &?. 6. Use these results to argue, informally, that the replication of agents does not affect the set of equilibrium allocations of the economy but shrinks its core.' We are using the term "shrink" loosely, since the presence of more agents changes the dimension of the allocation space, so comparing the sizes of the cores will require some refinement of the argument. In the limit, one can show that replication ad infinitum reduces the core to just the set of equilibrium allocations.1. Use this exercise to convince yourself that using different probabilities, the same discrete time chain may produce different stationary discrete time Markov chains with different transition matrices (we only consider two probabilities here in this problem; there are many other proba- bilities that can be chosen for which the process is not stationary or does not satisfy the Markov property). Consider two states 0 or 1 which a process (X9320 moves between. At each time step, t = D, 1, 2, 3, ..., a coin is ipped; at time t = 0, if the coin is heads then the process starts in state 1, or if the coin is tails the process starts in state 0; for t I: 1, if the coin is heads, then the process stays in whichever state it is currently in, or if the coin is tails, then the process switches states. (a) Suppose that we assign the underlying probability ll\" being one which would consider the coin to be fair and each ip independent. Give a brief justication why (Xfg is a stationary discrete time Markov chain with respect to this probability ll\1 . "Unit labor cost" is the same thing . as: A. The wage rate. B. 'The wage rate + MPP. The change in labor cost divided by the change in output. D. MC. 2. A production function: A. Shows the cost of producing any level of output. B. Is a technological relationship between factors of production and output. Expresses the least-cost method of producing a given level of output. D. Expresses our ability to produce various combinations of goods, using all of our resources . . 3.. Greater labor productivity means: A. Lower output per labor hour. B . Higher labor cost per unit of output. C. `Lower output per worker. D. Higher output per worker. 4. Productivity can be increased by: A... Technological advances. B. Increased managerial capabilities. -.C. Increased labor skills. D. All of the above. 5. Decisions which treat at least one factor of production as fixed are referred to as: A. Long-run decisions. B. Short-run decisions. D. C. Efficiency decisions.. Investment decisions. 6 The change in total output associated with one additional unit of input is : A. "The opportunity cost of the output. B. The average productivity. G. The marginal physical product. D. The total product from the input. 7 The law of diminishing returns states that beyond some point, ceteris . paribus: A. The returns on stocks and bonds diminish with higher security prices. B . . The addition to total utility diminishes as more units of a good are consumed. C. The marginal physical product of a factor of production diminishes as more of that factor is used. D. The output of any good increases as more variable input is used.8. Profit is: A. The difference between total cost and variable cost. B. The difference between total revenue and total cost. C. Earned at all points along the production function. D': Only possible with technical efficiency. 9. Rising marginal costs result from: . Rising prices of fixed inputs. B. Rising prices of variable inputs. C. Falling marginal physical product. D. All of the above.. 10. If an additional unit of labor costs $10 and has a MPP of 40 units of output, the marginal cost is:. A. $0. 25. B. $0. 40. C. $4.00. D. $400 . 00. 11. The sum of fixed cost and variable cost at any rate of output is: Total variable cost. B. Total cost. C. Average total cost. D.. Average marginal cost. 12. Costs of production that do not change with the rate of output are: A. Nonexistent. 6. . Variable costs. C. Fixed costs D. Marginal costs. 13. Which of the following would most likely be a fixed cost? A. The cost of property insurance. B. The cost of water used in the production process. C. The cost of labor used in the production process. D. The cost of electricity used in the production process. 14. At any given rate of output, the difference between total cost and fixed cost is: A. Marginal cost. B. Average variable cost. C. Zero in the short run. D.. Variable cost. 15. Costs of production that change with the rate of output are: A. Sunk costs. B. Fixed costs. C. Opportunity costs. D. Variable costs. 16. In the short run, which of the following is most likely a variable cost? A. Contractual lease payments. B. Interest payments on borrowed funds. C . Property taxes. D. Labor and materials costs.17. When the average total cost curve is rising, then the marginal cost curve will be A. Below the average fixed cost curve. C. B. . Falling with greater output. D. Above the average total cost curve. Below the average total cost. curve. 18. Explicit costs; A. Include only payments to labor. B. Are the sum of actual monetary payments made for resources used to produce a good. C. Include the market value of all resources used to produce a good. D. Are the total value of resources used to produce a good but for which no monetary payment is actually made. 19. If a given amount of output per period can be produced by several small- sized plants at the same unit cost as in one much larger plant, an economist would say that this long-run situation reflects the existence of: . A. Economies of scale. B. Diseconomies of scale. - C. Constant returns to scale. D. Diminishing returns. 20. When the wage rate is $5 per hour and the MPP of a worker is 20 units per hour, the unit labor cost is A. $0.25 per unit. B. $4.00 per hour. C. $100 per unit. D. $100 per hour. Use the following figure to answer the indicated question (s). MC ATC $148 144 AVC 104 100 COST (dollars per unit 100 120 RATE OF OUTPUT (unit per time period) 21. What is the total fixed cost in the above figure? C. $2,500. $4, 800. A. $8. B. $1, 200. Page 3