EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 13A.2, Problem 1MQ
To determine
To analyze the way a lump-sum tax of a fixed-dollar amount and a proportional tax affect the labor supply of an individual.
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What is the potential impact of income taxes on labor (consider the income effect and substitution effect)? Do you think it would be better to have a proportional income tax (flat tax) or progressive income tax? Explain.
Eric earns a base salary of $50,000 as a shipwreck diver and is subject to the following hypothetical income tax bracket. Eric
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$50,001+
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Given the information, will Eric undertake this extra dive?
yes
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Suppose you earned $60,000 per year and pay taxes based on marginal tax rates. The first tax bracket which taxes at 10% ranges from zero dollars to $30,000. The second tax bracket which tax at 25% ranges from 30,001 to $120,000. How much will you pay in total taxes?
Chapter 13A Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
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- The following table shows income tax rates in Econoland. Annual Income Up to $60,000 From $60,001 to $90,000 Over $90,000 This is an example of a Tax Rate 10% 20% 30% income tax. Nick, a resident of Econoland, currently works 20 hours a week and earns an annual income of $60,000. After paying income taxes, Nick receives per year. If Nick works an additional 10 hours a week (30 hours a week total), his annual income will be $90,000. After paying income taxes, Nick will receive per year. In other words, by working an additional 10 hours per week, Nick will receive an additional If Nick works 10 more hours in a week (40 hours a week total), his annual income will further increase to $120,000. After paying income taxes, Nick will receive per year. In other words, by working 10 more hours per week, Nick will receive more than what he would receive if he works only 30 hours a week. As Nick works more, the additional amount he receives from working 10 more hours " which means his cost of…arrow_forwardFor purposes of assessing income taxes, there are three official income levels for workers in a small country: high, medium, and low. The table to the right gives the marginal tax rate for the last hour on the job during a 40-hour workweek for each of these three worker types. Based only on this information, this nation's income tax system appears to be regressive Worker type Low-income worker Medium-income worker High-income worker Marginal tax rate 15 percent 20 percent 25 percent proportional progressive regressivearrow_forwardIf older workers have a tax elasticity of labor supply equal to 0.55, by how much will their work activity decline when they reach the Social Security earnings test limit (.e.. wage ceiling)? Recall that the Social Security earnings test limit says that Social Security benefits will be reduced by 50 cents for every additional $1 earned after the wage ceiling. Instructions: Enter your response as a positive percentage rounded to one decimal place. Do not include a negative sign with your answerarrow_forward
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