Donna runs an inn and charges $300 a night for a room, which equals her cost. Sam,
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Donna runs an inn and charges $300 a night for a room, which equals her cost. Sam, Harry, and Bill are three potential customers willing to pay $500, $325, and $250, respectively. When the government levies a tax on innkeepers of $50 per night of occupancy, Donna raises her price to $350. The deadweight loss of the tax is
a. $25.
b. $50.
c. $100.
d. $150.
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