Consider the economy of Citronia, where citizens consume only oranges. Assume that oranges are priced at $1 each. The government has devised the following tax plans: Plan A Plan B • Consumption up to 1,000 oranges is taxed at 5%. • Consumption up to 2,000 oranges is taxed at 40%. • Consumption higher than 1,000 oranges is taxed at 40%. • Consumption higher than 2,000 oranges is taxed at 10%. Use the Plan A and Plan B tax schemes to complete the following table by deriving the marginal and average tax rates under each tax plan at the consumption levels of 600 oranges, 1,400 oranges, and 2,500 oranges, respectively. Consumption Level Plan A Plan B (Quantity of oranges) Marginal Tax Rate Average Tax Rate Marginal Tax Rate Average Tax Rate (Percent) (Percent) (Percent) (Percent) 600 1,400 2,500 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 Regressive Plan A Plan B

Consider the economy of Citronia, where citizens consume only oranges. Assume that oranges are priced at $1 each. The government has devised the following tax plans: Plan A Plan B • Consumption up to 1,000 oranges is taxed at 5%. • Consumption up to 2,000 oranges is taxed at 40%. • Consumption higher than 1,000 oranges is taxed at 40%. • Consumption higher than 2,000 oranges is taxed at 10%. Use the Plan A and Plan B tax schemes to complete the following table by deriving the marginal and average tax rates under each tax plan at the consumption levels of 600 oranges, 1,400 oranges, and 2,500 oranges, respectively. Consumption Level Plan A Plan B (Quantity of oranges) Marginal Tax Rate Average Tax Rate Marginal Tax Rate Average Tax Rate (Percent) (Percent) (Percent) (Percent) 600 1,400 2,500 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 Regressive Plan A Plan B

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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