ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Q28

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The data describes the market for luxury boats.
The supply of luxury boats is perfectly elastic, the demand for luxury boats is unit
elastic, and with no tax on luxury boats the price is $4 million and 400 luxury
boats a week are bought.
Now the government puts 10 percent tax on luxury boats.
With the tax imposed, the price of a luxury boat is
A. $0.40 million
B. $4.20 million
C. $4 million
D. $400 million
E.
$4.40 million
With the 10 percent tax on luxury boats,
O A. the tax reduces the quantity of luxury boats sold to zero, so there is no
tax.
B. the buyer pays all of the tax.
C. the seller pays all of the tax.
D. the buyer and the seller split the tax evenly.
E. it is impossible to say how the tax is split between the buyer and seller.
The government raises tax revenue of $
million.
>>> Answer to 1 decimal place.
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Transcribed Image Text:The data describes the market for luxury boats. The supply of luxury boats is perfectly elastic, the demand for luxury boats is unit elastic, and with no tax on luxury boats the price is $4 million and 400 luxury boats a week are bought. Now the government puts 10 percent tax on luxury boats. With the tax imposed, the price of a luxury boat is A. $0.40 million B. $4.20 million C. $4 million D. $400 million E. $4.40 million With the 10 percent tax on luxury boats, O A. the tax reduces the quantity of luxury boats sold to zero, so there is no tax. B. the buyer pays all of the tax. C. the seller pays all of the tax. D. the buyer and the seller split the tax evenly. E. it is impossible to say how the tax is split between the buyer and seller. The government raises tax revenue of $ million. >>> Answer to 1 decimal place.
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