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 300 beets, 1,200 beets, and 3,000 beets, respectively. Consumption Level (Quantity of beets) 300 1,200 3,000 Plan X Plan Y Marginal Tax Rate Average Tax Rate Marginal Tax Rate (Percent) (Percent) (Percent) Average Tax Rate (Percent) Complete the following table by indicating whether each plan is a progressive tax system, a proportional tax system, or a regressive tax system.
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 300 beets, 1,200 beets, and 3,000 beets, respectively. Consumption Level (Quantity of beets) 300 1,200 3,000 Plan X Plan Y Marginal Tax Rate Average Tax Rate Marginal Tax Rate (Percent) (Percent) (Percent) Average Tax Rate (Percent) Complete the following table by indicating whether each plan is a progressive tax system, a proportional tax system, or a regressive tax system.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:5. Understanding marginal and average tax rates
Consider the imaginary nation of Leguminia, whose citizens only consume beets. Assume that the price of beets is $1 each. The government of
Leguminia has developed two different tax schemes, the details of which are outlined below:
Plan X
• Consumption up to 1,000 beets is taxed at 50%.
• Consumption higher than 1,000 beets is taxed at 20%.
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 300 beets, 1,200 beets, and 3,000 beets, respectively.
Consumption Level
(Quantity of beets) Marginal Tax Rate
(Percent)
Plan X
300
1,200
3,000
Plan Y
Plan Y
• Consumption up to 2,000 beets is taxed at 15%.
• Consumption higher than 2,000 beets is taxed at 60%.
Plan X
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 Regressive
Average Tax Rate
(Percent)
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