5. Understanding marginal and average tak Consider the Imaginary nation of Legumina, whose citizens only consume carrots. Assume that the price of carrots is $1 each. The government of Legumina has developed two different tax schemes, the details of which are outlined below: Plan X Consumption up to 1,000 carrots is taxed at 5%. Consumption higher than 1,000 carrots is taxed at 40%. Use the Plan X and Plan Y tax schemes to complete the following table by deriving the marginal and average tax rates under each tax plan at the consumption levels of 500 carrots, 1,400 carrots, and 2,500 carrots, respectively. Consumption Level (Quantity of carrots) Plan X 500 1,400 2,500 Plan Y Plan X Marginal Tax Rate (Percent) Plan Y Consumption up to 2,000 carrots is taxed at 30%. Consumption higher than 2,000 carrots is taxed at 10%. Plan Y Average Tax Rate Marginal Tax Rate (Percent) (Percent) Complete the following table by indicating whether each plan is a progressive tax system, a proportional tax system, or a regressive tax system. Progressive Proportional O Regressive O Average Tax Rate (Percent)

5. Understanding marginal and average tak Consider the Imaginary nation of Legumina, whose citizens only consume carrots. Assume that the price of carrots is $1 each. The government of Legumina has developed two different tax schemes, the details of which are outlined below: Plan X Consumption up to 1,000 carrots is taxed at 5%. Consumption higher than 1,000 carrots is taxed at 40%. Use the Plan X and Plan Y tax schemes to complete the following table by deriving the marginal and average tax rates under each tax plan at the consumption levels of 500 carrots, 1,400 carrots, and 2,500 carrots, respectively. Consumption Level (Quantity of carrots) Plan X 500 1,400 2,500 Plan Y Plan X Marginal Tax Rate (Percent) Plan Y Consumption up to 2,000 carrots is taxed at 30%. Consumption higher than 2,000 carrots is taxed at 10%. Plan Y Average Tax Rate Marginal Tax Rate (Percent) (Percent) Complete the following table by indicating whether each plan is a progressive tax system, a proportional tax system, or a regressive tax system. Progressive Proportional O Regressive O Average Tax Rate (Percent)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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In a supply-and-demand diagram, show how a tax on car buyers of $1,000 per car affects the quantity of cars sold and the price of cars. In another diagram, show how a tax on car sellers of $1,000 per car affects the quantity of cars sold and the price of cars. In both of your diagrams, show the change in the price paid by car buyers and the change in the price received by car sellers.
The figure below shows a market of good C. Suppose that the government levied a tax on C. Suppose that the consumers’ tax incidence is 15 and the price sellers receive is 8 when the size of the tax is T. Answer the value of T. Hint: Remember the relationship between the tax incidences and the size of tax.
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1. What is the equilibrium price and quantity? 2. Suppose the government imposes a tax of $1.00 on each water bottle. Complete the column showing quantity supplied after the tax. (Hint: at a price of $8.00 the quantity supplied was 36000. With the tax, this quantity supplied will be supplied only at a price of $9.00, so the Quantity supplied with a tax at 9.00 is 36000) You continue, so at $8.50, the producer only gets 7.50. so is only willing to offer 32000 units. Qd Price 000s) $9.00 20 8.50 8.00 7.50 7.00 6.50 6.00 24 28 32 36 40 44 Qs (000s) 44 40 38 32 28 24 20 Quantity supplied after tax Qs(t) (000s) 36 32 Price 28 24 3. On your graph, plot the new supply curve after the imposition of the tax (in a different colour, to differentiate the supply curve). 4. What will be the new equilibrium price and quantity? 5. How much of the tax is passed onto the consumers in the form of price increase, and how much is paid by the producers? Indicate the producer and consumer burden on your…
Indicate whether each the following statements about taxes is true or false. a. The incidence of a tax is determined by which group (buyers or sellers) must write the check to the government. O True O False
FRONT PAGE State Lotteries: A Tax on the Uneducated and the Poor Americans now spend over $85 billion a year on lottery tickets. That's more than we spend on sporting events, books, video games, movies, and music combined. That spending works out to about $650 a household. Poor people are proportionally the biggest buyers of lottery tickets. Households with less than $25,000 of income spend $1,100 a year on lottery tickets. By contrast, households with more than $50,000 of income buy only $300 of lottery tickets each year. Education also affects lottery spending: 2.7 percent of high school dropouts are compulsive lottery players, while only 1.1 percent of college grads play compulsively. Because lottery games are a sucker's game to start with-payouts average less than 60 percent of sales-lotteries are effectively a regressive tax on the uneducated and the es poor. Source: Research on lottery sales. According to Front Page Economics, what percentage of income is spent on lottery tickets…
QUESTION 10 Refer to the figure below: Tprice 10 6. 6. 4. D ater tade 10 20 30 40 50 60 70 80 quantity From the figure above, calculate the following: 1. The new price that the buyers will pay after the taxes. 2. The new price that the sellers will receive after the taxes 3. The tax burden on the buyers. 4. The tax burden on the sellers. 5. Tax size per unit. Note: Make sure to show details wherever necessary and possible. T T TT Paragraph 3 (12pt) E T - Arial T T HTML CSS O f Mashups 囲国旺 , 田! II
9. Effect of a tax on buyers and sellers The following graph shows the daily market for shoes when the tax on sellers is set at $0 per pair. Suppose the government institutes a tax of $23.20 per pair, to be paid by the seller. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Hint: To see the impact of the tax, first enter the value of the tax in the Tax on Sellers field. Adjust the value in the price field to move the green line to the after-tax equilibrium so that quantity demanded equals quantity supplied. Graph Input Tool Market for Shoes 200 180 I Price (Dollars per pair) $100 160 Quantity Demanded (Pairs of shoes) Quantity Supplied (Pairs of shoes) Supply 250.00 250.00 140 120 100 Supply Shifter 80 Demand Tax on Sellers (Dollars per pair) 60 0.00 40 20 50 100 150 200 250…
Suppose the government imposes a per-unit tax on the sellers of potato chips, shifting the supply curve upwards from S1 to S2, as shown in the following figure Price (per box) 35 26 20 200 300 S₂ S₁ D Quantity (boxes) a. How does the per-unit tax affect the quantity transacted, the price paid by buyers and the price received by sellers? b. Calculate the government tax revenue. Do the buyers or the sellers bear a larger tax burden?
Suppose consumers buy 60 million packs of cigarettes per month at a price of $5 per pack. If a $2 tax is added to that price, Instructions: Enter your responses as a percentage rounded to one decimal place. a. By what percentage does the price change? percent
Solve Question 2 Hand written solutions are strictly prohibited.
Suppose that before tax was imposed 400 million gallons of gasoline was supplied at $3.00 per gallon.a. What happens when government imposes a tax of 60 cents per gallon on sellers? b. How would such a tax affect the market for gasoline i.e. what is the new equilibrium? c. On whom does the incidence of the tax fall more heavily? d. How much government revenue will be generated by the excise tax? e. What happens when government imposes a tax of 60 cents per gallon on buyers? f. How would such a tax affect the market for gasoline i.e. what is the new equilibrium?