HO_06_201_Sp03 - Cal Poly Pomona EC 201 Principles of...

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Cal Poly Pomona, EC 201 Principles of Microeconomics – Professor Brown Handout # 6 1) Assume the following income tax structure (similar to table 12-3, pg. 247) INCOME: MARGINAL TAX RATE : $0 - 25,000 10% $25,000 - 50,000 20% $50,000 + 30% a) A person with income = $15,000 must pay tax = $ ___________, and their average tax rate = % _______ b) A person with income = $45,000 must pay tax = $ ___________, and their average tax rate = % _______ c) A person with income = $90,000 must pay tax = $ ___________, and their average tax rate = % _______ d) If a person initially earning $15,000 can either earn $1,000 extra in a taxable way, or $750 extra in a non-taxable way. Which should they choose? Briefly state why. e) Is the above tax system progressive ? How do we know? 2) a) Draw an appropriate Marginal Cost curve and label it MC – be especially careful to clearly indicate where the MC
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Unformatted text preview: curve crosses the ATC (Average Total Cost) curve. b) What is the total cost of producing 20 units of output? ______; 30 units of output? ______; 40 units of output? ______ 3) True False - clearly circle either T (true) of F (false) a) T or F IF Economic Cost > Accounting Cost, THEN Economic Profit < Accounting Profit. b) T or F Economists and Accountants both consider interest paid to bondholders as a cost c) T or F Marginal Cost = the increase in Total Cost when output increases by one unit. d) T or F IF an increase in output causes Marginal Cost to increase, THEN this increase in output will also cause Average Total Cost to increase. ATC $/Q Q - output 35 25 30 20 30 40...
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