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 7DQ
To determine
The benefit received and the ability to pay principle in a tax system.
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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
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, 25
Which of the following statements is
correct? Choose an answer:
O 1. Regardless of which side of the market the tax is levied on, the more inelastic side of the market bears the
higher tax burden.
O 2. If the supply is more elastic than the demand, then the suppliers bear the greater tax burden
than the buyers.
3. The tax burden is incurred on the side of the market where the tax is levied.
O 4. The tax burden is always borne half by the supplier and half by the customer.
O 5. If the demand is more inelastic than the supply, then the providers bear the greater
tax burden than the buyers.
O00
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