The goverment of Watertown requires that all residents of the city register thei

Question

The goverment of Watertown requires that all residents of the city register their cars in the city. It has put a 1.21% city tax on that value of cars registered in the city. Watertown collects no other specific excise taxes, and all other government revenues come from a neutral lump-sum tax. The burden of the tax if fully borne by consumers. Before the tax there were 125,880 cars registered in the city. After the tax, there are 117,086 cars are registered in the city. The average value of a registered car is $20,500 1) How much revenue is raised with the tax? (nearest whole number) 2) How much is the excess burden of the tax? (nearest whole number) 3) What is the excess burden as a percent of the revenue raised from the tax?

Explanation / Answer

No of cars before the tax(A) 125880 No of cars after the tax(B) 117086 Average value of the registered car

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