A tax of \( \$ 10.00 \) per night on hotel rooms a. increases the price the buyers pay by \( \$ 10.00 \) per night b. decreases the price the sellers receive by \( \$ 10.00 \) per night c. increases the price the buyers pay by precisely \( \$ 5.00 \) and reduces the price received by sellers by precisely \( \$ 5.00 \) d. places a tax wedge of \( \$ 10.00 \) between the price the buyers pay and the price the sellers receive

The correct answer is: **d. places a tax wedge of \( \$ 10.00 \) between the price the buyers pay and the price the sellers receive** **Explanation:** When a per-unit tax (in this case, \( \$10.00 \) per night) is imposed on a good or service, it creates a "tax wedge" between the price buyers pay and the price sellers receive. Specifically: - **Tax Wedge:** The difference between the price buyers pay (\( P_b \)) and the price sellers receive (\( P_s \)) equals the tax amount. \[ P_b - P_s = \$10.00 \] This means that the overall burden of the tax is split between buyers and sellers based on the relative elasticities of demand and supply. The tax doesn't necessarily increase the price buyers pay by the full tax amount nor does it decrease the sellers' received price by the full amount. Instead, it establishes a total difference (wedge) of \( \$10.00 \) between them. - **Option a** and **Option b** suggest that the entire tax burden falls on either buyers or sellers, which isn't necessarily true. - **Option c** suggests an equal split of the tax burden, which depends on the specific elasticities of demand and supply and isn't universally applicable. Therefore, **Option d** accurately reflects the general impact of a per-unit tax, regardless of how the burden is split. **Answer:** d. places a tax wedge of \( \$ 10.00 \) between the price the buyers pay and the price the sellers receive