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 • Consumption up to 1,000 oranges is taxed at 5%. • Consumption higher than 1,000 oranges is taxed at 50%. 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 oranges, 1,800 oranges, and 3,000 oranges, respectively. Consumption Level (Quantity of oranges) 500 1,800 3,000 Plan A Plan B Consumption up to 2,000 oranges is taxed at 45%. • Consumption higher than 2,000 oranges is taxed at 15%. Marginal Tax Rate (Percent) Average Tax Rate (Percent) Plan B Marginal Tax Rate (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.
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 • Consumption up to 1,000 oranges is taxed at 5%. • Consumption higher than 1,000 oranges is taxed at 50%. 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 oranges, 1,800 oranges, and 3,000 oranges, respectively. Consumption Level (Quantity of oranges) 500 1,800 3,000 Plan A Plan B Consumption up to 2,000 oranges is taxed at 45%. • Consumption higher than 2,000 oranges is taxed at 15%. Marginal Tax Rate (Percent) Average Tax Rate (Percent) Plan B Marginal Tax Rate (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.
Microeconomics: Principles & Policy
14th Edition
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:William J. Baumol, Alan S. Blinder, John L. Solow
Chapter17: Taxation And Resource Allocation
Section: Chapter Questions
Problem 2DQ
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