Question 21 Mountain View has 55 motel rooms The motel owner

Question 21 Mountain View has 55 motel rooms. The motel owners are willing to rent a room if th ey receive $40 or Not yet answered more. The demand for motel rooms in Mountain View is given by the equation Qd-100-P, where Qg is the number of rooms demanded and P is the price of a room. Suppose the City of Mountain View imposed a motel occupancy tax of $10 per room. The tax would be imposed on motel owners. Under the tax, each Points out of 1.00 Y Flag questionowner sends $10 to the City for each room it rents oun What is the excess burden of this tax? Select one: a. $20 b. $12.5 C.$37.5 d. $25 e. $40.5

Solution

Answer :- Option b). $ 12.5

Explanation :- Excess burden of tax = (10 + 40) * 10 / 40

= 50 * 10 / 40

= 50 * 0.25

= $ 12.5 (Option b).