Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

Hotel rooms in Smalltown go for $80, and 900 rooms are rented on a typical day. To raise revenue, the mayor decides to charge hotels

image text in transcribed
Hotel rooms in Smalltown go for $80, and 900 rooms are rented on a typical day. To raise revenue, the mayor decides to charge hotels a tax of $15 per rented room. After the tax is imposed, the going rate rises to $85, and the number of rooms rented falls to 800. Use the following graph to help you answer the questions that follow. You will not be graded on any changes you make to this graph. 140 O 120 Scratch Demand 100 Scratch Supply Price of Hotel Room s Scratch Points 200 400 600 800 1000 1200 1400 Quantity of Hotel Rooms This tax raises $ in government revenue and causes a deadweight loss of S IN in this market. The mayor now doubles the tax to $30. The price rises to $90, and the number of rooms rented falls to 700. This higher tax raises $ in government revenue and causes a deadweight loss of in this market. When the tax is doubled, the tax revenue rises by double, and the deadweight loss rises by double. 48 F

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing a risk based approach to conducting a quality audit

Authors: Karla Johnstone, Audrey Gramling, Larry Rittenberg

9th edition

978-1133939153

Students also viewed these Economics questions