Economics (7th Edition) (What's New in Economics)
7th Edition
ISBN: 9780134738321
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 18, Problem 18.4.15PA
To determine
Impact of marginal tax rate on the income of poor people.
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FRONT PAGE
State Lotteries: A Tax on the Uneducated and the Poor
Americans now spend over $85 billion a year on lottery
tickets. That's more than we spend on sporting events,
books, video games, movies, and music combined. That
spending works out to about $650 a household.
Poor people are proportionally the biggest buyers of lottery
tickets. Households with less than $25,000 of income spend
$1,100 a year on lottery tickets. By contrast, households
with more than $50,000 of income buy only $300 of lottery
tickets each year.
Education also affects lottery spending: 2.7 percent of high
school dropouts are compulsive lottery players, while only
1.1 percent of college grads play compulsively. Because
lottery games are a sucker's game to start with-payouts
average less than 60 percent of sales-lotteries are
effectively a regressive tax on the uneducated and the poor.
Source: Research on lottery sales.
According to Front Page Economics, what percentage of income is spent on lottery tickets by…
Chapter 18 Solutions
Economics (7th Edition) (What's New in Economics)
Ch. 18 - Prob. 18.1.1RQCh. 18 - Prob. 18.1.2RQCh. 18 - Prob. 18.1.3RQCh. 18 - Prob. 18.1.4RQCh. 18 - Prob. 18.1.5PACh. 18 - Prob. 18.1.6PACh. 18 - Prob. 18.1.7PACh. 18 - Prob. 18.1.8PACh. 18 - Prob. 18.1.9PACh. 18 - Prob. 18.1.10PA
Ch. 18 - Prob. 18.1.11PACh. 18 - Prob. 18.2.1RQCh. 18 - Prob. 18.2.2RQCh. 18 - Prob. 18.2.3RQCh. 18 - Prob. 18.2.4RQCh. 18 - Prob. 18.2.5PACh. 18 - Prob. 18.2.6PACh. 18 - Prob. 18.2.7PACh. 18 - Prob. 18.2.8PACh. 18 - Prob. 18.2.9PACh. 18 - Prob. 18.2.10PACh. 18 - Prob. 18.2.11PACh. 18 - Prob. 18.2.12PACh. 18 - Prob. 18.2.13PACh. 18 - Prob. 18.3.1RQCh. 18 - Prob. 18.3.2RQCh. 18 - Prob. 18.3.3PACh. 18 - Prob. 18.3.4PACh. 18 - Prob. 18.3.5PACh. 18 - Prob. 18.3.6PACh. 18 - Prob. 18.3.7PACh. 18 - Prob. 18.3.8PACh. 18 - Prob. 18.3.9PACh. 18 - Prob. 18.3.10PACh. 18 - Prob. 18.3.11PACh. 18 - Prob. 18.4.1RQCh. 18 - Prob. 18.4.2RQCh. 18 - Prob. 18.4.3RQCh. 18 - Prob. 18.4.4RQCh. 18 - Prob. 18.4.5RQCh. 18 - Prob. 18.4.6PACh. 18 - Prob. 18.4.7PACh. 18 - Prob. 18.4.8PACh. 18 - Prob. 18.4.9PACh. 18 - Prob. 18.4.10PACh. 18 - Prob. 18.4.11PACh. 18 - Prob. 18.4.12PACh. 18 - Prob. 18.4.13PACh. 18 - Prob. 18.4.14PACh. 18 - Prob. 18.4.15PACh. 18 - Prob. 18.1CTE
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Similar questions
- FRONT PAGE State Lotteries: A Tax on the Uneducated and the Poor Americans now spend over $85 billion a year on lottery tickets. That's more than we spend on sporting events, books, video games, movies, and music combined. That spending works out to about $650 a household. Poor people are proportionally the biggest buyers of lottery tickets. Households with less than $25,000 of income spend $1,100 a year on lottery tickets. By contrast, households with more than $50,000 of income buy only $300 of lottery tickets each year. Education also affects lottery spending: 2.7 percent of high school dropouts are compulsive lottery players, while only 1.1 percent of college grads play compulsively. Because lottery games are a sucker's game to start with-payouts average less than 60 percent of sales-lotteries are effectively a regressive tax on the uneducated and the es poor. Source: Research on lottery sales. According to Front Page Economics, what percentage of income is spent on lottery tickets…arrow_forwardSuppose that the U.S. government decides to charge wine producers a tax. Before the tax, 30 billion bottles of wine were sold every year at a price of $7 per bottle. After the tax, 25 billion bottles of wine are sold every year; consumers pay $9 per bottle, and producers receive $6 per bottle (after paying the tax). The amount of the tax on a bottle of wine is s per bottle. Of this amount, the burden that falls on consumers iss per bottle, and the burden that falls on producers is s per bottle.arrow_forwardCompare one poor person with an income of $10,000 per year with a relatively wealthy person who has an income of $60,000 per year. Imagine that the person drinks 15 bottles of wine per year at a price of $10 per bottle while the wealthy person drinks 50 bottles of wine per year at an average price of $20 per bottle. If a tax of $1 per bottle is imposed on wine, who pays more on taxes? Who pays the greater amount as a percentage of income? If a tax equal to 10% of the wine is imposed, who pays more in taxes? Who pays more as a greater percentage of income?arrow_forward
- Suppose that the U.S. government decides to charge cola producers a tax. Before the tax, 50 million cases of cola were sold every month at a price of $7 per case. After the tax, 43 million cases of cola are sold every month; consumers pay $10 per case, and producers receive $5 per case (after paying the tax). The amount of the tax on a case of cola 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 False: The effect of the tax on the quantity sold would have been the same as if the tax had been levied on consumers. True Falsearrow_forwardThe graph illustrates the labor market in a country that does not tax labour income Suppose that the government introduces a Social Security tax on workers of $2 an hour. How many workers are employed? What is the wage rate paid by employers and what is the workers' after-tax wage rate? How many workers are no longer employed? The number of workers employed is 14.00 13.00 12.00- 11.00 10.00- 9.00- 8.00- 7.00 Wage rate (dollars per hour) 10.00 600 700 900 900 1000 1100 500 Quantity (workers) LS LD 1200 ouarrow_forwardSuppose that the U.S. government decides to charge wine producers a tax. Before the tax, 35,000 bottles of wine were sold every week at a price of $4 per bottle. After the tax, 29,000 bottles of wine are sold every week; consumers pay $5 per bottle, and producers receive $1 per bottle (after paying the tax). The amount of the tax on a bottle of wine is $ per bottle. Of this amount, the burden that falls on consumers is $ per bottle, and the burden that falls on producers is $ per bottle. 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 consumers. True Falsearrow_forward
- Suppose that the U.S. government decides to charge beer producers a tax. Before the tax, 20 million cases of beer were sold every month at a price of $4 per case. After the tax, 13 million cases of beer are sold every month; consumers pay $7 per case, and producers receive $2 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 the same as if the tax had been levied on consumers. True Falsearrow_forwardWrite the summary of following paragraph. Tax Treaty A tax treaty is an agreement between two or more countries by dividing the right to impose a tax on income derived from a state sourced by a resident or resident of another country. The purpose of this tax treaty is to avoid the imposition of double taxation and various tax evasion efforts arising from transactions between the two countries. One of the tax treaties that will be discussed is the Indonesian tax treaty with Singapore which was signed on May 8, 1990. The avoidance of double taxation on the tax object is as follows: • Immovable property, income from immovable property under Indonesian- Singapore tax treaty is taxable only from the country in which the immovable property is situated even though the owner of the immovable object is not a national of that State. • The operating profit earned by a business entity in a country under this agreement may only be imposed by the country of which the enterprise is domiciled, but…arrow_forwardSuppose that the U.S. government decides to charge cola consumers a tax. Before the tax, 20 million cases of cola were sold every month at a price of $4 per case. After the tax, 13 million cases of cola are sold every month; consumers pay $7 per case (including the tax), and producers receive $2 per case. The amount of the tax on a case of cola is S 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 larger if the tax had been levied on producers. True Falsearrow_forward
- Suppose that the U.S. government decides to charge wine consumers a tax. Before the tax, 25 billion bottles of wine were sold every year at a price of $7 per bottle. After the tax, 19 billion bottles of wine are sold every year; consumers pay $8 per bottle (including the tax), and producers receive $4 per bottle. The amount of the tax on a bottle of wine is per bottle. Of this amount, the burden that falls on consumers is per bottle, and the burden that falls on producers is per bottle. True or False: The effect of the tax on the quantity sold would have been smaller if the tax had been levied on producers. True Falsearrow_forwardMacmillan Learning Suppose that a city government introduces a $0.50 excise (commodity) tax on consumers of bottles of soda to improve the health of its citizens. Manipulate the accompanying graph to demonstrate the impact of the tax on the market for soda. What would be the new equilibrium quantity if instead of taxing consumers, the city taxed producers? 5.0 4.5 4.0 3.5 Market for Bottles of Soda thousand bottles Price ($/bottle) 3.0 2.5 2.0 1.5 1.0 0.5 0.0 0 1 2 5 6 3 4 Quantity (thousands of bottles) D 7 8 9 10arrow_forwardSuppose that the local government of Raleigh decides to institute a tax on soda producers. Before the tax, 40 billion liters of soda were sold every year at a price of $11 per liter. After the tax, 35 billion liters of soda are sold every year; consumers pay $ 15 per liter, and producers receive $9 per liter (after paying the tax). The amount of the tax on a liter of soda is $ per liter. Of this amount, the burden that falls on consumers is $ per liter, and the burden that falls on producers is $ per liter. True or False: The effect of the tax on the quantity sold would have been smaller if the tax had been levied on consumers.arrow_forward
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