5. Understanding marginal and average tax rates Consider the economy of Cocoland, where citizens consume only coconuts. Assume that coconuts are priced at $1 each. The government has devised the following tax plans: Plan A Plan B • Consumption up to 1,000 coconuts is taxed at 5%. • Consumption up to 2,000 coconuts is taxed at 45%. • Consumption higher than 1,000 coconuts is taxed at 50%. • Consumption higher than 2,000 coconuts is taxed at 15%. 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 500 coconuts, 1,800 coconuts, and 3,000 coconuts, respectively. Consumption Level Plan A Plan B (Quantity of coconuts) Marginal Tax Rate Average Tax Rate Marginal Tax Rate Average Tax Rate (Percent) (Percent) (Percent) (Percent) 500 5 45 1,800 50 45 3,000 50 15 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

5. Understanding marginal and average tax rates Consider the economy of Cocoland, where citizens consume only coconuts. Assume that coconuts are priced at $1 each. The government has devised the following tax plans: Plan A Plan B • Consumption up to 1,000 coconuts is taxed at 5%. • Consumption up to 2,000 coconuts is taxed at 45%. • Consumption higher than 1,000 coconuts is taxed at 50%. • Consumption higher than 2,000 coconuts is taxed at 15%. 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 500 coconuts, 1,800 coconuts, and 3,000 coconuts, respectively. Consumption Level Plan A Plan B (Quantity of coconuts) Marginal Tax Rate Average Tax Rate Marginal Tax Rate Average Tax Rate (Percent) (Percent) (Percent) (Percent) 500 5 45 1,800 50 45 3,000 50 15 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

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: The Design Of The Tax System

Section: Chapter Questions

Problem 2PA

See similar textbooks

Similar questions

Suppose that gifts were taxed at a rate of 10 for amounts up to 100,000 and 20 for anything over that amount. Would this tax be regressive or progressive?
5. Understanding marginal and average tax rates 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.…
8. Understanding marginal and average tax rates Consider the economy of Pomistan, where citizens consume only apples. Assume that apples cost $1 each, and each person can buy at most 5,000 apples. The government has devised the following tax plans: Plan A Plan B Consumption up to 1,000 apples is taxed at 10%. Consumption up to 2,000 apples is taxed at 20%. Consumption higher than 1,000 apples is taxed at 40%. Consumption higher than 2,000 apples is taxed at 10%. Derive the marginal and average tax rates under each tax plan at the consumption levels of 500 apples, 1,500 apples, and 2,500 apples, respectively. Fill in the following table with your results. Plan A Plan B Consumption Level Marginal Tax Rate Average Tax Rate Marginal Tax Rate Average Tax Rate 500 apples 10% 10% 20% 20% 1,500 apples 40% 20% 2,500 apples 40% 10%
9.which flows represent taxes? a. C and D b. E and F c. A and B d. D and E
The top 1% of income earners in the U.S. (those with the highest taxable incomes) pay O about the same percentage of their incomes in taxes as the average U.S. taxpayer. a much lower percentage of their incomes in taxes than the average U.S. taxpayer. O a much higher percentage of their incomes in taxes than the average U.S. taxpayer. O about 15 percent of their incomes in income taxes O a and d
Tax Revenue ($) 50 NE 40 30 20 10 0 20 40 60 According to this Laffer curve, should the government increase the tax rate from 4C 80 Tax Rate (%) 100 O a.) Yes, because the tax revenue continues to increase after a tax rate of 4C b.) No, because the government should increase the tax rate to 100%. c) No, because the tax revenue is no longer maximized. NVIDIA G SYNE d.) Yes, because the government will receive a higher tax revenue. O
5. Calculating tax incidence Suppose that the U.S. government decides to charge beer consumers a tax. Before the tax, 35 billion cases of beer were sold every year at a price of $6 per case. After the tax, 28 billion cases of beer are sold every year; consumers pay $7 per case (including the tax), and producers receive $4 per case. The amount of the tax on a case of beer 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 the same as if the tax had been levied on producers. True False
5. Calculating tax incidence Suppose that the U.S. government decides to charge beer producers a tax. Before the tax, 25 billion cases of beer were sold every year at a price of $7 per case. After the tax, 19 billion cases of beer are sold every year; consumers pay $8 per case, and producers receive $4 per case (after paying the tax) The amount of the tax on a case of beer 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 True False
Table 12-10 On Taxable Income ... The Tax Rate is.. Up to $8,375 10% From $8,375 to $34,000 15 From $34,000 to $82,400 25 From $82,400 to $171,850 28 From $171,850 to $373,650 33 Over $373,650 35 Refer to Table 12-10. If Willie has $170,000 in taxable income, his tax liability will be a. $16,781. b. $41,309. c. $41,827. d. $47,600.
5. Calculating tax incidence Suppose that the U.S. government decides to charge beer producers a tax. Before the tax, 25 billion cases of beer were sold every year at a price of $5 per case. After the tax, 18 billion cases of beer are sold every year; consumers pay $6 per case, and producers receive $3 per case (after paying the tax). The amount of the tax on a case of beer is S per case. Of this amount, the burden that falls on consumers is per case, and the burden that falls on producers is S per case. True or Falser The effect of the tax on the quantity sold would have been the same as if the tax had been levied on consumers. True O False
5. Calculating tax incidence Suppose that the U.S. government decides to charge cola consumers a tax. Before the tax, 50 billion cases of cola were sold every year at a price of $6 per case. After the tax, 45 billion cases of cola are sold every year; consumers pay $8 per case (including the tax), and producers receive $5 per case. The amount of the tax on a case of cola is $ the burden that falls on producers is $ True or False: The effect of the tax on the quantity sold would have been the same as if the tax had been levied on producers. True per case. Of this amount, the burden that falls on consumers is $ per case. False per case, and
5. Calculating tax incidence Suppose that the U.S. government decides to charge cola producers a tax. Before the tax, 25 million cases of cola were sold every month at a price of $7 per case. After the tax, 18 million cases of cola are sold every month; consumers pay $8 per case, and producers receive $5 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. O True O False