Hotel rooms in Smalltown go for $100, and 1,000 rooms are rented on a typical day.

a. To raise revenue, the mayor decides to charge hotels a tax of $10 per rented room. After the tax is imposed, the going rate for hotel rooms rises to

$108, and the number of rooms rented falls to 900.

Calculate the amount of revenue this tax raises for Smalltown and the deadweight loss of the tax.

(Hint: The area of a triangle is ½ 3 base 3 height.)

b. The mayor now doubles the tax to $20. The price rises to $116, and the number of rooms rented falls to