Marginal tax rates and average tax rates are rarely the same. What happens to the relationship between marginal tax rates and average tax rates as incomes rise in the highest tax brackets?
What will be an ideal response?
The average tax rate begins to become closer and closer to the marginal tax rate in the highest tax brackets. The reason is that the marginal rate on the last dollars earned raises the average tax rate. Since fewer dollars as a percentage of income are taxed at lower rates the average begins to converge to the marginal rate.
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Kate's Great Crete (KGC) is a local monopolist of ready-mix concrete. Its annual demand function is Q = 20,000 - 400P, where P is the price, in dollars, of a cubic yard of concrete and Q is the number of cubic yards sold per year. What is KGC's inverse demand function?
A. P = 20,000 - 400Q B. P = 400 - 20,000Q C. P = 50 - 0.0025Q D. P = 50 - 0.005Q
After graduating from college, Jim had three choices, listed in order of preference: (1) Move to Florida from Philadelphia, (2) work in a car dealership in Philadelphia, or (3) play soccer for a minor league in Philadelphia. His opportunity cost of moving to Florida includes
a. the benefits he could have received from playing soccer b. the income he could have earned at the car dealership c. both a and b d. cannot be determined from the given information
Which of the following is the best example of a normative economic statement?
a. A rise in gasoline prices will cause gasoline purchases to fall. b. The federal government should spend more on health care. c. Raising the minimum wage will result in greater unemployment. d. If more money is printed, then the economy's price level will rise.
One of the problems created by price floors is that
a. consumers complain about high prices b. firms have no incentives to reduce cost c. excess supply is created d. people must learn to cope with excess demand e. technological change is significantly impacted