Refer to Figure 16.5 below. If the marginal cost of underreporting can be written as MC = X 2 +
(A) What is the maximum marginal tax level (t) possible that will ensure tax evasion is zero?
(B) If the Marginal Tax rate is equal to 0.56, how much income will be evaded?
(A) t* < 0.40
(B) Set MB = MC so that X 2 + 0.4 = 0.56, X 2 = 0.16 and X = 0.40
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When income increases from $20,000 to $30,000 the quantity of inter-city bus trips taken per year decreases from 10 to 8. Hence
A) inter-city bus trips are a normal good. B) the income elasticity of demand for inter-city bus trips is -1.8. C) the income elasticity of demand for inter-city bus trips is -0.56. D) Both answers A and B are correct. E) Both answers A and C are correct.
When long-run average costs increase as output increases, there are
A) economies of scale. B) diseconomies of scale. C) constant returns to scale. D) constant marginal costs.
A family on a trip budgets $800 for meals and gasoline. If the price of a meal for the family is $50, how many meals can the family buy if they do not buy any gasoline?
a. 8 b. 16 c. 24 d. 32
Which of the following actions by the Fed would be most likely to stimulate the economy?
A) Purchasing bonds on the open market. B) Increasing interest rates from 3% to 5% to encourage more savings. C) Increasing the required reserve ratio to ensure that banks stay solvent. D) Raising the discount rate charged to commercial banks.