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Suppose that hotel rooms in London are $250, and usually 1,200 rooms are rented in a day. In order to raise revenue, the mayor decides
Suppose that hotel rooms in London are $250, and usually 1,200 rooms are rented in a day.
In order to raise revenue, the mayor decides to charge hotels a tax of $20 per rented room. After the tax is imposed, the going rate for hotel rooms rises to $260, and the number of rooms rented falls to 950. Calculate the amount of revenue this tax raises for this hotel and the deadweight loss of the tax. (Hint: the area of a triangle is 1/2 * base * height.)
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