Answer:
1. a. Average Tax rate = 130/2,000 = 6.5%
Marginal Tax Rate = (130 - 0)/ (2,000 - 0) = 6.5%
b. Average Tax rate = 650/10,000 = 6.5%
Marginal Tax Rate = = 6.5%
c. Average Tax rate = 1,300/20,000 = 6.5%
Marginal Tax Rate = = 6.5%
d. Average Tax rate = 6,500/100,000 = 6.5%
Marginal Tax Rate = = 6.5%
2. The tax rates shown in this table are: <u>Proportional</u>
Proportional Taxes take the same percentage of income across all income groups.
3. A. True
4. Sean and Bob would both vote yes as the Marginal Benefit of the project exceeds their marginal cost but project will not be funded in the end as the Total Marginal Cost exceeds Total Marginal benefit. Sean and Bob may want to pay but Yvette will not.
5. If this same project were taking place in the private sector, a firm <u>would not</u> fund the project.
6. In private markets, decisions to provide goods or services to the market are generally made if marginal benefits <u>exceed</u> marginal costs
7. As a result, governments may approve projects whose costs <u>exceed</u> their benefits.