consider the economy of pomistan where citizens consume only apples. assume that
ID: 1180251 • 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 taXrate AVERAGE TAX RATE
500 apples A) 5% B) 10% C) 20% D)14% A)5 B)10%C)20% D)14% CHOOSE A,B,C,D FOR MARGINAL TAX AND ATR
1,500 apples A) 5% B) 10% C) 20% D)14% A)5 B)10%C)20% D)14% CHOOSE A,B,C,D FOR MARGINAL TAX AND ATR
22,500 apples A) 5% B) 10% C) 20% D)14% A)5 B)10%C)20% D)14% CHOOSE A,B,C,D FOR MARGINAL TAX AND ATR
plan B
500 apples A)25 % B)23% C)21 % D)15 % A)25% B)23% C) 20% D) 15% CHOOSE A,B,C,D FOR MARGINAL TAX AND ATR
1,500 apples A)25 % B)23% C)21 % D)15 % A)25% B)23% C) 20% D) 15% CHOOSE A,B,C,D FOR MARGINAL TAX AND ATR
2,500 APPLES A)25 % B)23% C)21 % D)15 % A)25% B)23% C) 20% D) 15% CHOOSE A,B,C,D FOR MARGINAL TAX AND ATR
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 RATE
Explanation / Answer
Consumption Level - 500 apples. Plan A marginal tax rate ____20%_______ Plan A average tax rate__20%_______
Consumption Level
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