Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 20, Problem 4RQ
To determine
The type of taxation involved in each transaction.
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Refer to the tax table below. If your taxable income is $8,000, your average and
marginal tax rates are
Taxable Income Total Tax
$ 2,000
$ 200
4,000
600
6,000
1,200
8,000
2,000
10,500
3,000
25% average rate and 25% marginal rate on additional income.
25% average rate and 40% marginal rate on additional income.
20% average rate and 30% marginal rate on additional income.
25% average rate with a marginal rate that can not be determined.
Suppose George made $20,000 last year and that he lives in the country of Harmony. The way Harmony levies income taxes, all
citizens must pay 10 percent in taxes on their first $10,000 in earnings and then 50 percent in taxes on anything else they might earn.
Given that George earned $20,000 last year, his marginal tax rate on the last dollar he earns will be
rate for his entire income will be
and his average tax
O 10 percent; 50 percent
O 50 percent; less than 50 percent
O 10 percent; less than 50 percent
O 50 percent; 50 percent
The top 1% of income earners in the U.S. (those with the highest taxable incomes) pay
O about the same percentage of their incomes in taxes as the average U.S. taxpayer.
a much lower percentage of their incomes in taxes than the average U.S. taxpayer.
O a much higher percentage of their incomes in taxes than the average U.S. taxpayer.
O about 15 percent of their incomes in income taxes
O a and d
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- 1. Suppose the marginal or bracket tax rate for income from $1 to $15,000 is 12%, the marginal tax rate for income between $15,001 and $30,000 is 20%, and the marginal tax rate for income between $30,001 and $50,000 is 25%. How much in taxes would someone with a $40,000 income pay? Is this tax system progressive, regressive, or proportional? Why?arrow_forwardIf Heather's tax liability increases from $10,000 to $16,000 when her income increases from $30,000 to $40,000, her marginal tax rate is 33 percent. 35 percent. 50 percent. O 60 percent.arrow_forward9. True or false? If the statement is false, explain why: LO4 a. An internally held public debt is like a debt of the left hand owed to the right hand. b. The Federal Reserve and federal government agencies hold more than half the public debt. c. As a percentage of GDP, the federal debt held by the public was smaller in 2010 than it was in 1990. d. As a percentage of GDP, the total U.S. public debt is the highest such debt among the world’s advanced industrial nations.arrow_forward
- If the tax code exempts the first $20,000 of income from taxation and then taxes 25 percent of all income above that level, then a person who earns percent and a marginal tax rate of $50,000 has an average tax rate of percent. O 15, 25 O 25, 15 O 25, 30 O 30, 25arrow_forwardTable 27-1 Y- C+I-G C- s00 - 0.S(Y – T) I- 300 G- 700 T- 0.25Y Table 27-1 Y= C+I+G C- 500 - 0.S(Y-T) I- 300 G- 700 T- 0.25Y Refer to Table 27-1. What is the level of tax revenues in this model? O a. 437.5 O 0. 1,000 OC 945.5 O0.937.5 O e.950arrow_forward4 Suppose that Alberta imposes a sales tax of 10 percent on all goods and services. An Albertan named Ralph then goes into a home improvement store in the provincial capital of Edmonton and buys a leaf blower that is priced at $200. With the 10 percent sales tax, his total comes to $220. How much of the $220 paid by Ralph will be counted in the national income and product accounts as private income (employee compensation, rents, interest, proprietors' income, and corporate profits) v (Click to select) $220 $200 $180 None of the abovearrow_forward
- 4. Suppose that there are two households in the economy, A and B, that they face the same wage rate w, and that the government initially uses a proportional income tax according to which each household must pay a fraction t of its labor income as income tax. Assume that given this tax scheme household A chooses to work full time while household B chooses to work part time. Now suppose that the government is interesting in studying the impact of changing the tax system to a progressive tax system where the household work- ing full time would pay a tax rate th >t while the household working part time would pay a rate ti < t. (a) Draw a graph of the impact of this change on the budget constraint that households face with the two different tax systems. (b) What would such a change in the tax system imply for the optimal choice of the two households?arrow_forwardPaying a tax of $15 on an income of $200, a tax of $10 on an income of $300, and a tax of $8 on an income of $400 is an example of a: O a) progressive tax. O b) b) regressive tax. O c) proportional tax. O d) constant-rate tax.arrow_forwardThe nation of Upstandia uses kroner for money and its tax code is such that a person making 100,000 kroner per year pays 40,000 kroner per year in income taxes; a person making 200,000 kroner per year pays 70,000 kroner per year in income taxes; and a person making 300,000 kroner per year pays 90,000 kroner per year in income taxes. Upstandia’s income tax system is: a. Progressive. b. Regressive. c. Proportional.arrow_forward
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