Suppose perfect competition prevails in the market for hotel rooms. The current market equilibrium price of a standard hotel room is $100 per night. Show that the current market equilibrium is efficient, assuming that both the marginal cost incurred by sellers and the marginal benefit perceived by buyers reflect all costs and benefits associated with production and use of hotel rooms. Suppose a $10 per night tax is levied on hotel occupancy. Show how this tax will prevent the market from achieving efficient output. Show the loss in net benefits from hotel use resulting from the tax.
Answer to relevant QuestionsThe supply of paper is described by the following equation: Qs = 5,000P where Qs is tons supplied per year and P is the price per ton. The demand is described by QD = 400,000 – 1,000P where QD is tons demanded per year. ...Suppose the marginal cost of a pure public good increases as more is purchased by a community. Prove that the Lindahl equilibrium will result in a budget surplus at the efficient annual output of the pure public good. Suppose a proposed new road to be constructed in North Carolina between Raleigh and Morehead City will lower the average cost per trip by car from $5 to $4. Currently, 500,000 trips are made between the two cities per year. ...Get the directions for the Federal Income Tax or go to http://www.irs.gov to obtain the tables for the EITC for the current year. Explain how the program increases earnings for low-income workers and affects their ...Suppose you currently earn taxable income of $100,000 per year. You are subject to an MTR of 50 percent. Currently, your ATR is 35 percent. Calculate your annual tax. Calculate the extra tax that you would pay per year if ...
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