**Understanding Marginal and Average Tax Rates in Harmony**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.**Tax Rate Calculation:**- **Marginal Tax Rate:** This is the rate of tax applied to the last dollar earned. For George, earning $20,000, the last dollar falls under the 50 percent tax bracket.- **Average Tax Rate:** This is the total tax paid divided by total income. George pays 10 percent on the first $10,000 ($1,000) and 50 percent on the next $10,000 ($5,000). The total tax is $6,000. Therefore, the average tax rate is $6,000 / $20,000 = 30 percent.**Answer Options:**- 10 percent; 50 percent- 50 percent; less than 50 percent- 10 percent; less than 50 percent- 50 percent; 50 percentThe correct choice for George's marginal and average tax rates are:- Marginal Tax Rate: 50 percent- Average Tax Rate: Less than 50 percent (30 percent)

Marginal tax is the tax paid on the last dollar. Here it would be 50% as income exceeds 10000 $Total…

Answered: Suppose George made $20,000 last year…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Table 12-16 The table below provides information on the 4 households that make up a small economy and how much they would pay in taxes under 3 types of taxes. Household A B C D Ability to Pay low and same as B low and same as A high and same as D high and same as C oooo Refer to Table 12-16. In this economy Tax C exhibits horizontal and vertical equity. horizontal equity but not vertical equity. vertical equity but not horizontal equity. Tax A 100 100 100 100 neither horizontal nor vertical equity. Tax B 30 30 40 1 40 Tax C 40 50 60 70
Suppose that the debt-to-GDP ratio is 0.53, the real interest rate on the debt is 6%, and the growth rate of real GDP is 3%. What is the maximum primary deficit or surplus (as a percentage of GDP) that the government can run and not increase the debt-to-GDP ratio? O A. 1.59% surplus O B. 1.59% deficit OC. 3.18% surplus O D. 3.18% deficit
Suppose a local government imposes a tax on sales of firewood. Before the tax, 20,000 bundles were sold at an average price of $6 per bundle. With the tax in effect, 16,000 bundles are sold, buyers pay $6.40 per pack, and sellers receive $5.50 per pack. In this scenario, the tax is $____ per pack, the tax incidence that falls on buyers is $______ per pack, and the tax incidence that falls on sellers is $______ per pack.
4 Proportional Tax Suppose the market for a good is described by the following equations: Qa=60-3P and Qs = -20+5P 1. If the government asks the supplier to pay a 20% GST for every transaction: • What is the new supply and demand curve? • What is the new equilibrium of price paid by the consumers to producers? . What is the new equilibrium quantity? • How much is the total tax collected? 2. If the government asks the consumers to pay a 20% GST for every transaction: redo sub-questions above 3. For proportional tax, do taxing suppliers and taxing consumers make a difference?
If the poverty guideline for a family of four is $25,750, what is the income deficit if household income is $16,500? O $42,250 O $16,500 O $25,750 O $9,250 Unit 7- Chapter 1..xlsx 0Unit 7 Chapter 1..xlsx O Topic 2 (2).docx OTopic 2 (1).docx 11:07 PM 73°F "prt sc delete f12 Sus pua LL 10 144 61 I01 num -> backspace lock enter H. pause * shift W || N ctrl alt
6. The negative income tax Many economists believe that a more effective way to supplement the income of the poor is through a negative income tax. Under this scheme, everyone reports his or her income to the government; individuals and families earning a higher income will pay a tax based on that income, while low-income individuals and families receive a subsidy, or negative tax. Assume that the only qualification required to receive a tax credit is low income. Suppose the government uses the following equation to compute a family's tax liability: Taxes Owed = (1/4 of Income) – $6,000 For each of the incomes listed in the following table, determine the tax liability for a family with that income level. (Note: If a family receives a subsidy because its income is too low, be sure to indicate the tax liability as negative.) Income Tax Liability (Dollars per year) (Dollars per year) 12,000 24,000 60,000 True or False: If a family is currently receiving a tax credit, the credit is reduced…
12. In Taxland, the first $10,000 earned per year is exempt from taxation. Between $10,000.01 and $30,000, the tax rate is 25 percent. Between $30,000.01 and $50,000, it's 30 percent. Above $50,000, it's 35 percent. You're earning $80,000 a year. (LO18-4) a. How much in taxes will you have to pay? b. What is your average tax rate? c. What is your marginal tax rate?
5. Now assume that a recession ( triggered by a reduction of Aggregate Demand ) causes each of the five incomes to fall by 25 % . In other words , income is 75 % of what they used to be . Given the lower income , a ) what would be the total tax revenue paid by each of the five citizens ? b ) what is the total tax revenue for the small nation ?
What 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.
Suppose that the U.S. government decides to charge cola producers a tax. Before the tax, 30 billion cases of cola were sold every year at a price of $4 per case. After the tax, 23 billion cases of cola are sold every year; consumers pay $5 per case, and producers receive $2 per case (after paying the tax). The amount of the tax on a case of cola is $_________ per case. Of this amount, the burden that falls on consumers is $_________ per case, and the burden that falls on producers is $__________ per case. True or False: The effect of the tax on the quantity sold would have been smaller if the tax had been levied on consumers.
Tax incidence is O A. the potential division of the burden of a tax between buyers and government in a market. O B. the potential division of the burden of a tax between buyers and sellers in a market. O C. the actual division of the burden of a tax between buyers and sellers in a market. O D. the actual division of the burden of a tax between buyers and government in a market.
2

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