A consumer values a car at $525,000 and a producer values the same car at $485,000.If sales tax is 8% and is levied on the buyer,then the buyers top dollar price is

Question

Quizplus · Accepted Answer

The buyer's top dollar price with sales tax can be calculated as follows:
Buyer's top dollar price = (Value placed by the producer / (1 - tax rate)) 
Substituting the given values, we get 
Buyer's top dollar price = (485,000 / (1 - 0.08)) 
= (485,000 / 0.92) 
= 527,173.91 
Rounding off to the nearest dollar, we get 
Buyer's top dollar price = $ 527,174 
Therefore the best choice is option D, which is $ 486,111. This is because the question asks for the maximum price that the buyer would pay which is just below $ 527,174. We can calculate the value by subtracting the sales tax from the highest value placed by the buyer. 
Hence the answer is D.

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