CONNECT F/MICROECONOMICS
21st Edition
ISBN: 2810022151240
Author: McConnell
Publisher: MCG
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Question
Chapter 18, Problem 3RQ
To determine
Main argument by the advocates of single tax movement.
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Suppose George made $20,000 last year and that he lives in the country of Harmony. The way Harmony levies income taxes, all
citizens 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.
Given that George earned $20,000 last year, his marginal tax rate on the last dollar he earns will be
rate for his entire income will be
and his average tax
O 10 percent; 50 percent
O 50 percent; less than 50 percent
O 10 percent; less than 50 percent
O 50 percent; 50 percent
5. LO 4 Suppose, as in the federal income tax code
for the United States, that the representative con-
sumer faces a wage income tax with a standard
deduction. That is, the representative consumer
pays no tax on wage income for the first x units of
real wage income, and then pays a proportional
taxt on each unit of real wage income greater than
x Therefore, the consumer's budget constraint
given by C wh -D + if wh- D=x., or
C (1-wh-D+ tx+ if_wCh = D2
Now, suppose that the government reduces
tax deduction x Using diagrams, determine the
effects of this tax change on the consumer, and
explain your results in terms of income and sub
stitution effects. Make sure that you consider two
cases. In the first case, the consumer does not pay
any tax before x is reduced, and in the second
case, the consumer pays a positive tax before x
is reduced
Question 5:
Combined state and federal taxes on gasoline average around 50 cents per gallon, and these taxes are statutorily levied on gasoline sellers. Because
the demand for gasoline is relatively inelastic compared to the supply of gasoline:
buyers likely do not bear much of the actual burden because it is statutorily levied on sellers who must submit the tax payments.
sellers likely bear most of the actual burden of the tax through lower gasoline prices.
O the net price received by sellers after they pay taxes likely falls by almost the full amount of the tax.
O buyers likely bear most of the actual burden of the tax through higher gasoline prices.
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Similar questions
- 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.arrow_forwardQuestion 8 Year 1 2 3 4 5 Government Government tax revenues expenditures (billions of dollars) 240 250 260 300 325 O 50 What is the amount of the surplus or deficit incurred in year 5 by the government shown in the above table?. O $15 billion deficit O $15 billion surplus (billions of dollars) 240 245 255 320 340 O $5 billion surplusarrow_forward> D Question 4 Price (dollars per widget) a O 8 4 N 10 $6. S O between $8 and $6. more than or equal to $8. less than $6. 1 pts 20 30 40 50 60 Quantity (millions of widgets per year) In the figure above, if a tax of $2 per widget is imposed on sellers, then the after-tax amount per widget received by the seller will bearrow_forward
- Table 27-1 Y- C+I-G C- s00 - 0.S(Y – T) I- 300 G- 700 T- 0.25Y Table 27-1 Y= C+I+G C- 500 - 0.S(Y-T) I- 300 G- 700 T- 0.25Y Refer to Table 27-1. What is the level of tax revenues in this model? O a. 437.5 O 0. 1,000 OC 945.5 O0.937.5 O e.950arrow_forwardWhich of the following statements is correct? Choose an answer: O 1. Regardless of which side of the market the tax is levied on, the more inelastic side of the market bears the higher tax burden. O 2. If the supply is more elastic than the demand, then the suppliers bear the greater tax burden than the buyers. 3. The tax burden is incurred on the side of the market where the tax is levied. O 4. The tax burden is always borne half by the supplier and half by the customer. O 5. If the demand is more inelastic than the supply, then the providers bear the greater tax burden than the buyers. O00arrow_forward4 l 51% a 12:02 O Worksheet (25%) Suppose that the governrnent irmposes a tax oni cigarettes. Use the diagram below to answer the questions D is the demand curve before tax S is the supply curve before tax and S is the supply curve after the tax. Price 18 12 10 10 12 Qua (a) For the market for cigarettes without the tax indicate: () Price paid by consumers (1i) Price paid by producers () Quantity of cigarettes sold (iv) Buyer's reservation pricearrow_forward
- Figure #2 price 10 D after as 10 20 40 50 70 Refer to Figure#2. Respectively, what are the tax burdens paid by consumers and sellers? O $1.00 per unit and $2.00 per unit O $3.00 per unit and $1.00 per unit O $1.00 per unit and $3.00 per unit- $3.00 per unit and $2.00 per unit O Tyne here to searcharrow_forwardThe top 1% of income earners in the U.S. (those with the highest taxable incomes) pay O about the same percentage of their incomes in taxes as the average U.S. taxpayer. a much lower percentage of their incomes in taxes than the average U.S. taxpayer. O a much higher percentage of their incomes in taxes than the average U.S. taxpayer. O about 15 percent of their incomes in income taxes O a and darrow_forwardWhat is the tax rate percentage and what is it applied to in order to fund and pay for Medicare? O 2.9 percent on wages 5.8 percent on real estate sales 1.5 percent on inheritances for estates valued at more than $15,000. 8 percent on elective surgeries and medical tourism.arrow_forward
- 20 18 S 16 14 12 10 8 D 4 2 0 + 0 1 2 3 4 5 6 7 8 9 10 11 12 Quantity Suppose that supply and demand at a market are represented by curves S and D at the figure above (notice that the vertical axis grid has increments of $2) and then a tax of $6 dollars per unit is imposed on buyers. What is the tax burden on the sellers? $8 $6 $4 $2 Pricearrow_forwardSuppose that a country has 20 million households. Ten million are poor households that each have labor market earnings of $20,000 per year and 10 million are rich households that each have labor market earnings of $80,000 per year. If the government enacted a marginal tax of 10 percent on all labor market earnings above $20,000 and transferred this money to households earning $20,000 or less, would the incomes of the poor rise by $8,000 per year? O A. No. Workers in rich and poor households would work less because of the marginal tax. O B. Yes. 10% of $80,000 is $8,000; therefore, $8,000 from each rich household would be transferred to each poor household. O C. There is not enough information to determine household behavior in this case. O D. No. Only workers in rich households would work less because of the marginal tax.arrow_forwardSuppose that the demand and supply functions for a good are given as follows: Demand: O600-SP Supply: O= 300+4P Suppose now that government imposes $2 tax perunit of output on sellers. What is the burden on buyers 12 27 15arrow_forward
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