Suppose Congress enacts a tax reform law, and the average federal tax rate drops from 30% to 10%. Researchers investigate the impact of the tax cut and find that the income subject to the tax increases from $600 billion to $700 billion. The theoretical explanation is that workers have increased their work effort in response to the incentive of lower taxes. On the following graph, use the green point (triangle symbol) to plot the point corresponding to the income of $600 billion. Then use the orange point (square symbol) to plot the point corresponding to the income of $700 billion. FEDERAL TAX REVENUE (Billions of dollars) 220 200 180 160 140 - 120 - 100 80 S 60 40 20 0 0 10 20 O True 30 40 50 60 70 80 FEDERAL TAX RATE (Percent) O False 90 Laffer Curve 100 110 A Income $800 O Income $700 True or False: The change in income is represented by a movement along the upward-sloping portion of the Laffer curve. (?)
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- Government-imposed taxes cause reductions in the activity that is being taxed, which has important implications for revenue collections. To understand the effect of such a tax, consider the monthly market for cigarettes, which is shown on the following graph. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. PRICE (Dollars per pack) 10 9 8 6 2 1 0 0 # Supply Demand 10 20 30 40 50 60 70 80 90 100 QUANTITY (Packs) Graph Input Tool Market for Cigarettes 31- Quantity (Packs) Demand Price (Dollars per pack) (Dollars per pack) Suppose the government imposes a $2-per-pack tax on suppliers. At this tax amount, the equilibrium quantity of cigarettes is Tax 40 6.00 2.00 Supply Price (Dollars per pack) packs, and the government collects $ ? 4.00 in tax revenue.Government-imposed taxes cause reductions in the activity that is being taxed, which has important implications for revenue collections. To understand the effect of such a tax, consider the monthly market for cigarettes, which is shown on the following graph. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. PRICE (Dollars per pack) 10 9 TAX REVENUE (Dollars) Suppose the government imposes a $2-per-pack tax on suppliers. At this tax amount, the equilibrium quantity of cigarettes is 200 180 160 140 120 100 80 60 40 20 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Packs) 0 Now calculate the government's tax revenue if it sets a tax of $0, $2, $4, $5, $6, $8, or $10 per pack. (Hint: To find the equilibrium quantity after the tax, adjust the "Quantity" field until the Tax equals the…Government-imposed taxes cause reductions in the activity that is being taxed, which has important implications for revenue collections. To understand the effect of such a tax, consider the monthly market for wine, which is shown on the following graph. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. PRICE (Dollars per case) 50 45 40 35 30 25 20 15 10 5 0 1 Supply Demand 09 18 27 36 45 54 63 72 81 90 QUANTITY (Cases) Graph Input Tool Suppose the government imposes a $10-per-case tax on suppliers. At this tax amount, the equilibrium quantity of wine is Market for Wine Quantity (Cases) Demand Price (Dollars per case) Tax (Dollars per case) 36 30.00 10.00 Supply Price (Dollars per case) cases, and the government collects $ ? 20.00 in tax revenue.
- A tax on gasoline is proposed in order to raise money for the pollution-control activities of several public agencies. The tax will be 10¢ per gallon, and last year 10.3 million gallons of gasoline were used by motorists (this is strictly an illustrative number). Does this mean that we can anticipate $1,030,000 in revenues from this tax? Explain and use a graph to answer this question.Government-imposed taxes cause reductions in the activity that is being taxed, which has important implications for revenue collections. To understand the effect of such a tax, consider the monthly market for rum, which is shown on the following graph. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.Government-imposed taxes cause reductions in the activity that is being taxed, which has important implications for revenue collections. To understand the effect of such a tax, consider the monthly market for champagne, which is shown on the following graph. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. PRICE (Dollars per case) 82222220 50 45 40 35 30 25 15 10 5 0 LI Supply Demand 16 24 32 40 48 56 64 72 80 QUANTITY (Cases) Graph Input Tool Market for Champagne Quantity (Cases) Demand Price (Dollars per case) Tax (Dollars per case) 32 30.00 10.00 Supply Price (Dollars per case) 20.00
- Each small square in the grid for this graph has one side equal to 1 pound of bolts and one side equal to 1 dollar per pound. The area of one small square is therefore_______. There are ________ small squares in the purple shaded rectangle. On this graph, the area of the purple rectangle corresponds to: Jack Hardware’s revenue from selling bolts, measured in dollars The price of the bolts, measured in dollars per pound The number of bolts that Jack Hardware sold, measured in pounds None of these—the area has no meaning Now suppose Jack Hardware lowers its price to $3.00 per pound of bolts. As a result, it now sells 8 pounds of bolts. Use the blue rectangle to draw the area that corresponds to the new price and quantity. Did lowering the price of bolts increase Jack Hardware’s revenue? Yes NoThis question is complete. The graph provides all the information. Use the graph to the right to answer the following question. Which of the following is not true according to the graph? A) Taxpayers in the top 1% of income levels paid more money in income taxes than they would have without the tax cuts. B) The treasury estimate if the share of tax cuts had not been enacted is 34%. C) Taxpayers in the top 1% of income levels paid a greater percentage of total federal income tax revenue than they would have without the tax cuts.If your income is $60 and the prices of product A and product B are $4 and $3, respectively, how many units of product B can you purchase when all your income will be used to purchase product B only? Use a number, no decimal value, no commas, no space, no unit of measurement. * Your answer If your income is $60 and the prices of product A and product B are $4 and $3, respectively, what would be the function of the budget line, when product A is assigned on the Y axis? * O Qb = 20 - 1.33 Qa O Qa = 15 - 0.75 Qb O Qb = 15 - 1.33 Qa %3D Qa = 20 - 0.75 Qb
- Suppose that when the interest rate on loans is 16 percent, businesses find it unprofitable to invest in machinery and equipment. However, when the interest rate is 14 percent, $5 billion worth of investment is profitable. At 12 percent interest, a total of $10 billion of investment is profitable. Similarly, total investment increases by $5 billion for each successive 2-percentagepoint decline in the interest rate. Describe the relevant relationship between the interest rate and investment in a table, on a graph, and as an equation. Put the interest rate on the vertical axis and investment on the horizontal axis. In your equation use the form i = a + bI, where i is the interest rate, a is the vertical intercept, b is the slope of the line (which is negative),and I is the level of investment.The variable shown on the vertical axis is _________ . The units for the variable on the horizontal axis are __________ . There are two ways to view the information presented on the graph. First, the graph tells us the amount a person with a certain income is likely to spend on a car, and second, it tells us the probable income of a person who spent a certain amount on a car. For example, if an individual earned $40,000 last year and purchased a new car, you would expect that person to have paid about _________ for the car. Similarly, if someone just paid $25,000 for a car, you could use this graph to estimate that this person's income was probably around __________ .Assume you are an economist at Ministry of Economy. During the budget consultations, a participant suggested that the government should consider using income tax as a tool for improving productivity. The Principal Economic Planning Officer has directed you to provide him with the analysis of the impact of income tax changes on labour market. Using relevant diagram(s) illustrate and discuss the implications of changes in the income tax on labour market.