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What is the difference between a marginal tax rate and an average tax rate?
- What is the difference between a marginal tax rate and an average tax rate? 2 pts
- The federal government imposes a tax on sales of cigarettes. The following data are from a Gallup poll:
Percentage who smoke, by Annual Household Income
Income Percentage who smoke
Less than $12,000 34%
$12,000 - $35,999 28
$36,000 - $59,999 22
$60,000 - $89,999 16
$90,000 + 13
Based on these data, would the federal cigarette tax be considered progressive or regressive? Be sure to define progressive tax and regressive tax in your answer. 3 pts
- Suppose the government decides to tax sales of pizza. Show the effect of the tax on the market for pizzas with the help of a graph. Assume the equilibrium price and quantity before the tax was imposed was $10 and 100 units. Per unit tax is $4. After the tax price and quantity are $12 and 80 units.
- Answer the following questions from the graph/Draw the graph: 2 pts
- After the tax, what price do sellers receive? 1 pt
- How much revenue is collected by the government? What is the buyers share and what is the sellers share? 1 pt
- Is there any deadweight loss? Calculate. 1 pt