Jurisdiction F levies a 10% excise tax on the purchase of golf carts.The annual revenue from this tax averages $800,000 (10% * $8 million average annual golf cart purchases).Jurisdiction F is considering raising the tax rate to 12%.Which of the following statements is true?
A)The rate increase will increase revenue by $160,000.
B)Based on a dynamic forecast,the rate increase will increase revenue by $160,000.
C)Based on a static forecast,the rate increase will increase revenue by $160,000.
D)None of the above is true.

Question

Quizplus · Accepted Answer

A static forecast assumes that the quantity of golf carts purchased remains constant, so a 2% increase in the tax rate would increase revenue by $160,000 (2% of $8 million).

Jurisdiction F Levies a 10% Excise Tax on the Purchase