World famous Burpee Beer is brewed in the small town of West Burpee. Currently, the town of West Burpee levies a $2 per-case tax on all Burpee Beer, and the brewery sells 20,000 cases a year at a price, that includes the tax, of $20 per case. The mayor of West Burpee has decided to erect a statue of himself in the town square at a cost of $20,000 and wants to raise the money from additional tax revenue from sales of Burpee Beer. He has asked each of the three town council members to come up with a plan to raise the additional $20,000. Council member Simpson advises increasing the percase tax by $1. Council member Milhouse advises raising the tax by $2 per case. Council member Flanders advises reducing the current tax by $0.50 per case. For all of the following questions, keep in mind that the objective is to raise a total of $75,000 in tax revenue. Additionally, assume supply is perfectly elastic. If the mayor chooses Simpson's plan, the total cases of beer that would need to be produced to increase tax revenue by exactly $20,000 is cases.

World famous Burpee Beer is brewed in the small town of West Burpee. Currently, the town of West Burpee levies a $2 per-case tax on all Burpee Beer, and the brewery sells 20,000 cases a year at a price, that includes the tax, of $20 per case. The mayor of West Burpee has decided to erect a statue of himself in the town square at a cost of $20,000 and wants to raise the money from additional tax revenue from sales of Burpee Beer. He has asked each of the three town council members to come up with a plan to raise the additional $20,000. Council member Simpson advises increasing the percase tax by $1. Council member Milhouse advises raising the tax by $2 per case. Council member Flanders advises reducing the current tax by $0.50 per case. For all of the following questions, keep in mind that the objective is to raise a total of $75,000 in tax revenue. Additionally, assume supply is perfectly elastic. If the mayor chooses Simpson's plan, the total cases of beer that would need to be produced to increase tax revenue by exactly $20,000 is cases.

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter5: Elasticity Of Demand And Supply

Section5.A: Appendix: Price Elasticity And Tax Incidence

Problem 1AQ

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