econ 200 (ECON200)

Homework 8 - solution 1. 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 rims 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 times base times height) b. The mayor now doubles the ta...