Consider a government that raises money in a two-good economy by taxing good 1 at a rate of t per unit. The government is considering replacing these taxes with a lump-sum tax to the consumer that raises the same revenue. Thus, if the consumer consumes x units of good 1 before the change in taxes, she must pay the government a lump sum of tx after the change. Suppose, moreover, that prices change only by the amount of the tax; i.e., if prices are (p₁+t, p2) before the change, then they become (P1, P2) after. Let x = (x₁, x2) be the consumer's demand before the change, and x' = (x₁, x2) the consumer's demand after. Suppose that x x'.
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- Suppose the wage is 80 per hour and that the consumer has 100 hours H to work with. Suppose that the MRS is given by c/(l−10) . What will the consumer’s choices of c and l be. Repeat with an upper bound of 10 hours. Repeat both parts with a 10% tax rate for all income levels. Suppose that the tax rate has two brackets so that income from hours above (1/5)H is taxed at 20 percent. How does the solution change? Suppose that consumers must instead pay a lump sum tax that raises the same tax revenues as the one listed above. How will outcomes change?Assume the following behavioral equations for a macroeconomy: C = 100 + .9Yd, l = 50, T= $100 and G = $40 from the above behavioral equation tax multiplier is Select one: O a. 1 b. none of the options O c. 10 O d. 9A consumer derives utility from two goods (x and y), and her utility function is in the form u(x,y) = xy. Her income is 120 TL, and the prices of x and y are both 1 TL: a) Suppose that a tax of 1 TL per unit is levied on good x. How will this alter her utility maximizing market basket of goods? b) Suppose that instead of the per unit tax in (a), an income tax of the same total tax revenue is levied on the consumer. What is her utility maximizing market basket? c) Show your analysis in part (a) and (b) on a graph.
- Suppose George made $20,000 last year and that he lives in the country of Harmony. The way Harmony levies income taxes, each citizen must pay 10 percent in taxes on their first $10,000 in earnings and then 50 percent in taxes on anything else they might earn. So given that George earned $20,000 last year, his marginal tax rate on the last dollar he earns will be __________ and his average tax rate for his entire income will be _________________. a. 50 percent; 50 percent. b. 50 percent; less than 50 percent. c. 10 percent; 50 percent. d. 10 percent; less than 50 percent.Miller wants to discourage energy drink purchase, so he's considering a $1 tax or $2 tax on the drink. 1. Is Sen. Miller's plan for a two dollar tax better at stopping consumers from purchasing energy drinks? Why or why not? Incorporate your knowledge of the Laffer Curve in your response.a) Solve for equilibrium output in terms of the exogenous variables. b) What is the multiplier? Is the multiplier higher whent1is 0 or whent1is positive? Note)t1= 0is the same as the baseline case we covered in class when taxes are exogenous. c) Supposec0increases by $300 m. What is the change in equilibrium Y when c1= 0.5 and t1= 0.2. What about whenc1= 0.5 and t1= 0?
- Being a legislative in nature, the power to tax may not be delegated excepta. To local governments or political subdivisionsb. When allowed by constitutionc. When delegation related merely to administrative implementation that may callfor some degree of discretionary powers under a set of sufficient standardsexpressed by law or implied from the policy and purpose of the act.d. All of the above Which theory in taxation states that without taxes, a government would be paralyzed forlack of power to activate and operate it, resulting in its destruction?a. Power to destroy theoryb. Lifeblood theoryc. Sumptuary theoryd. Symbiotic doctrineEqual increases in government spending andtaxes willa. cancel each other out so that the equilibriumlevel of real GDP remains unchanged.b. lead to an equal decrease in the equilibriumlevel of real GDP.c. lead to an equal increase in the equilibriumlevel of real GDP.d. lead to an increase in the equilibrium levelof real GDP output that is larger than theinitial change in government spendingand taxes.The U.S. income tax is currently O progressive O proportional O regressive O proactive a tax.
- Suppose that in an effort to reduce the deficit, it is decided that some luxuries should be heavily taxed. Suppose that you are asked to recommend one of two taxes: a 50% tax on the sale of old master paintings, or a 50% tax on yachts. Given that your goal is to minimize the dead weightloss, which of these two markets would you tax, and why? (Hint: Compare the demand and supply conditions.)Please write down whether the following statements are true or false, and explain your answer very briefly. If prices are constant economic incidence would be the more than legislative (statutory) incidence. Regarding incidence analysis, if we examine distributional changes which result if one tax is substituted for another while holding total expenditure and tax revenue as constant, then we use budget incidence. If the individual works more after the tax on labour, that means substitution effect outweighs the income effect. Supply side economists are for increasing the tax rates. As a result of increase in the tax rate, both excess burden and taxrevenue increase. 4 A progressive tax system encourages individuals to work harder. The more elastic is demand is relative to supply, the greater the portion of burden is borne by consumers.consumers increased consumption by a relatively small amount in 2008 and 2009 because thet believe the tax cuts temporary. true or false