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marta [7]
2 years ago
5

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
Business
1 answer:
alina1380 [7]2 years ago
6 0

Answer:

a. $25

Explanation:

According to the given situation, the computation of deadweight loss of the tax is shown below:-

Deadweight Loss = 1 ÷ 2 × 1 × ($350 - $300) = 1 ÷ 2 × ($50)

Or, Deadweight Loss = 1 ÷ 2 × ($50)

Or,  Deadweight Loss = $25

Therefore the correct option is a. $25

We simply considered the above values so that the deadweight loss of the ta could come

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