Chapter 6: Q. d (page 133)
Why is there always a difference between static analysis and dynamic analysis of tax changes?
Yes.
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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?
Aseniorcitizengetsapart-timejobatafast-food
restaurant.Sheearns\(8perhourforeachhoursheworks,andsheworksexactly25hoursperweek.Thus,hertotalpretaxweeklyincomeis\)200.Hertotalincometaxassessmenteachweekis\(40.Shepays\)3intaxesforthefinalhoursheworkseachweek.
a. What is this person's average tax rate each week?
b. What is the marginal tax rate for the last hour
she works each week?
The following information applies to the market for
a particular item in the absence of a unit excise tax:
a.According to the information in the table,in the
absence ofaunit excise tax,what is the market
price?What is the equilibrium quantity?
b.Suppose that the government decides to subject
producers of this item toaunit excise tax equal
to$2per unit sold.What is the new market
price?What is the new equilibrium quantity?
c.What portion of the tax is paid by producers?
What portion of the tax is paid by consumers?
Given that in recent years, the governments of many nations have been reducing corporate income tax rates in relation to the US rate (which remains one of the world's highest), is the US tax base shrinkage likely to slow down or speed up? Explain.
What was the individual's marginal state income tax rate in 2018? Did this individual experience proportional, progressive, or regressive taxation? Explain briefly.
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