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    This year, Jurisdiction A raised revenue by increasing its g

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    This year, Jurisdiction A raised revenue by increasing its general sales tax rate from 5 percent to 6 percent. Because of the increase, the volume of taxable sales declined from $800 million to $710 million. In contrast, Jurisdiction Z raised revenues from its 5 percent sales tax by expanding the tax base to include certain retail services. The volume of services subject to tax was $50 million. Compute the additional revenue raised by Jurisdiction A and by Jurisdiction Z.

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    Solution Preview

    This year, Jurisdiction A raised revenue by increasing its general sales tax rate from 5 percent to 6 percent. Because of the increase, the volume of taxable sales declined from $800 million to $710 million. In contrast, Jurisdiction Z raised revenues from its 5 percent sales tax by expanding the tax base to include certain retail services. The ...

    Solution Summary

    This year, Jurisdiction A raised revenue by increasing its general sales tax rate from 5 percent to 6 percent. Because of the increase, the volume of taxable sales declined from $800 million to $710 million. In contrast, Jurisdiction Z raised revenues from its 5 percent sales tax by expanding the tax base to include certain retail services. The volume of services subject to tax was $50 million. Compute the additional revenue raised by Jurisdiction A and by Jurisdiction Z.

    $2.19