Suppose that a local government is considering placing a tax on the rental of rooms on Airbnb. Before the tax, the total revenue earned by hosts using Airbnb was $10,000,000 per year. a) If the government imposes a 10% tax on these rooms, will they earn more or less than $1,000,000 in tax revenue if the market is assumed to be perfectly competitive?

Suppose that a local government is considering placing a tax on the rental of rooms on Airbnb. Before the tax, the total revenue earned by hosts using Airbnb was $10,000,000 per year. a) If the government imposes a 10% tax on these rooms, will they earn more or less than $1,000,000 in tax revenue if the market is assumed to be perfectly competitive?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter10: Monopolistic Competition And Oligopoly

Section: Chapter Questions

Problem 16CTQ: Would you rather have efficiency or variety? That is, one opportunity cost of the variety of...

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