Chapter 6: Q. 6.10 (page 140)
Between 2017 and 2018, a small businessperson's income increased from
Average tax rates: 2.5%
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The British government recently imposed a unit excise tax of about$154 per ticket on airline tickets for flights to or from London airports. In answering the following questions, assume normally shaped demand and supply curves.
a. Use an appropriate diagram to predict the effects of the ticket tax on the market-clearing price of London airline tickets and on the equilibrium number of flights into and out of London.
b. What do you predict is likely to happen to the equilibrium price of tickets for air flights into and out of cities that are in close proximity to London but are not subject to the new ticket tax? Explain your reasoning.
Why is there always a difference between static analysis and dynamic analysis of tax changes?
Why might people be willing to sacrifice dollars to avoid "feeling bad" about flouting tax laws?
To raise funds aimed at providing more support for
public schools,astate government has just imposed
aunit excise tax equal to\(4for each monthly unit
of wireless phone services sold by each company
operating in the state.The following diagram
depicts the positions of the demand and supply
curves for wireless phone services before the unit
the excise tax was imposed. Use this diagram to deter
mine the position of the new market supply curve
now that the tax hike has gone into effect.
a.Does imposing the \)4-per-month unit excise tax
cause the market price of wireless phone ser
vices to rise by\(4per month?Why or why not?
b.What portion of the \)4-per-month unit excise
tax is paid by consumers? What portion is paid
by providers of wireless phone services?
Explain the structure of the U.S. income tax system.
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