Consider the economy of Pomistan, where citizens consume only apples. Assume that apples cost $1 each, and each person can buy at most 5,000 apples. The government has devised the following tax plans: Plan A Consumption up to 1,000 apples is taxed at 20%. Consumption higher than 1,000 apples is taxed at 80%. Derive the marginal and average tax rates under each tax plan at the consumption levels of 500 apples, 1,500 apples, and 2,500 apples, respectively. Fill in the following table with your results. Consumption Level 500 apples 1,500 apples 2,500 apples Plan A Marginal Tax Rate 20% ▼ 80% Plan B Consumption up to 2,000 apples is taxed at 25%. Consumption higher than 2,000 apples is taxed at 15%. 80% Average Tax Rate 20% Plan B Marginal Tax Rate 25% 25% 15% Average Tax Rate 25%

Consider the economy of Pomistan, where citizens consume only apples. Assume that apples cost $1 each, and each person can buy at most 5,000 apples. The government has devised the following tax plans: Plan A Consumption up to 1,000 apples is taxed at 20%. Consumption higher than 1,000 apples is taxed at 80%. Derive the marginal and average tax rates under each tax plan at the consumption levels of 500 apples, 1,500 apples, and 2,500 apples, respectively. Fill in the following table with your results. Consumption Level 500 apples 1,500 apples 2,500 apples Plan A Marginal Tax Rate 20% ▼ 80% Plan B Consumption up to 2,000 apples is taxed at 25%. Consumption higher than 2,000 apples is taxed at 15%. 80% Average Tax Rate 20% Plan B Marginal Tax Rate 25% 25% 15% Average Tax Rate 25%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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