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# Consider the economy of Citronia- where citizens consume only oranges-.docx

Consider the economy of Citronia, where citizens consume only oranges. Assume that oranges are priced at \$1 each. The government has devised the following tax plans:
Plan A
Solution
Average Tax=Total Tax/ Quantity
For Quantity 1400 in Plan A Average Tax rate=(1000*5%+(1400-1000)*40%)/1400=15%
Plan A
Consumption
Marginal
Average
500
5%
5.0%
1400
40%
15.0%
2500
40%
26.0%
Plan B
Consumption
Marginal
Average
500
30%
30.0%
1400
30%
30.0%
2500
10%
14.0%

.

Consider the economy of Citronia, where citizens consume only oranges. Assume that oranges are priced at \$1 each. The government has devised the following tax plans:
Plan A
Solution
Average Tax=Total Tax/ Quantity
For Quantity 1400 in Plan A Average Tax rate=(1000*5%+(1400-1000)*40%)/1400=15%
Plan A
Consumption
Marginal
Average
500
5%
5.0%
1400
40%
15.0%
2500
40%
26.0%
Plan B
Consumption
Marginal
Average
500
30%
30.0%
1400
30%
30.0%
2500
10%
14.0%

.

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