What is the long run incidence

Reference no: EM131200118

The city of Malaise is considering a 10% tax on the revenues of all hotels/motels inside the city limits. Although not completely different from hotels and motels in the nearby suburbs, the ones in Malaise have a distinct advantage in their proximity to interesting sights and convention centers. So individuals will pay some premium to stay in Malaise rather than to stay nearby.

Furthermore, all land is used equally well by hotels/motels and other forms of business; any Malaise land not taken by a hotel/motel is readily absorbed by other forms of business. Mayor Maladroit calls you in to advise him on the incidence of such a tax. He is particularly concerned with who will bear this tax in the short run (one month) and the long run (five years).

a. What is the incidence of the tax in the short run? Answer intuitively, and use a diagram if possible.

b. What is the long-run incidence? Once again, use a diagram if possible.

c. How would your analysis in (b) change if hotels/motels in the suburbs were perfect substitutes for those in Malaise? What would happen to tax revenues?

Reference no: EM131200118

Questions Cloud

Analyze your overall reaction after attending the event : Provide specific information and a description of at least two pieces. Provide a summary of the event and describe your overall reaction after attending the event.

Primary value chain activities : Which of the following are primary value chain activities? What is the most logical relationship between a sustainable competitive advantage and an organizational strength?

What is the purpose of such a voltage follower : A simple way to construct an active filter is to start with a passive filter of the same type and add a voltage follower to the output. What is the purpose of such a voltage follower?

What procedural steps must the officers perform : The court could choose either a preliminary hearing or a grand jury proceeding to establish probable cause for the felony charges in this case. Compare and contrast the two procedures. Identify what issues the judge would take into consideration w..

What is the long run incidence : What is the incidence of the tax in the short run? Answer intuitively, and use a diagram if possible.- What is the long-run incidence? Once again, use a diagram if possible.

Explain the operation of this arrangement : Explain the operation of this arrangement. Extend this idea to a full impedance bridge for LVDT measurement

Calculate the deadweight loss of a tax : Calculate the deadweight loss of a tax of $4 per unit levied on producers of super-sticky glue.- How does deadweight loss change if the tax is levied on consumers of super-sticky glue?

Role systems thinking plays in organizational performance : Describe the role systems thinking plays in organizational performance. The best way to do this is to use an example based upon your research from the articles and your personal experience.

Where will the tax inefficiency be greater : The government of Washlovia wants to impose a tax on clothes dryers. - Where will the tax inefficiency be greater? Explain.

User Account

All Pages