consider the economy of pomistan where citizens consume only apples. assume that
ID: 1180246 • Letter: C
Question
consider the economy of pomistan where citizens consume only apples. assume that apples are priced at $1 each and each person can buy at most 5,000 apples the government has devised the following tax plans.
plan a - comsumption up to 1,000 apples is taxed at 5% comsumption higher then 1,000 apples is taxed at 20%
plan b- consumption up to 2,000 apples is taxed at 25% consumption higher then 2,000 apples is taxed at 15%
derive the marginal and average tax rates under each tax plan at the comsumtion levels of 500 apples, 1,500 apples and 2,500 apples.
plan A:
consumtion level of apples marginal tax rate average tax rate
500 apples 1) 5% 2) 10% 3) 20% 4)14% 1)5%2)10%3)20% 4) 14%
1,500 apples 1) 5% 2) 10% 3 )20% 4)14% 1)5%2)10%3)20% 4) 14%
22,500 apples 1) 5% 2) 10% 3 )20% 4)14% 1)5%2)10%3)20% 4) 14%
plan B
500 apples 1)25% 2)23% 3) 21% 4) 15% 1) 25% 2)23% 3)21% 4)15%
1,500 apples 1)25% 2)23% 3) 21% 4) 15% 1) 25% 2)23% 3)21% 4)15%
2,500 apples 1)25% 2)23% 3) 21% 4) 15% 1) 25% 2)23% 3)21% 4)15%
under plan B the average tax rate A) eventually decreases B) eventually increases as more apples are comsumed. therefore plan B is a A) proportional B) regressive C) progressive tax system
Explanation / Answer
Consumption Level - 500 apples. Plan A marginal tax rate ____20%_______ Plan A average tax rate__20%_______
Consumption Level
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