A consumer values a car at $525,000 and a producer values the same car at $485,000.If the transaction is completed at $510,000,what level of tax rate will result in unconsummated transaction?

Question

Quizplus · Accepted Answer

A 5% tax on the $510,000 transaction would be $25,500, making the total cost to the consumer $535,500, which exceeds their valuation of $525,000, thus preventing the transaction.

A Consumer Values a Car at $525,000 and a Producer