Home » What is the difference between a marginal tax rate and an average tax rate?

What is the difference between a marginal tax rate and an average tax rate?

  1. What is the difference between a marginal tax rate and an average tax rate? 2 pts
  1. The federal government imposes a tax on sales of cigarettes. The following data are from a Gallup poll:

     Percentage who smoke, by Annual Household Income

     Income               Percentage who smoke

     Less than $12,000        34%

$12,000 – $35,999       28

$36,000 – $59,999       22

 $60,000 – $89,999       16

$90,000 +              13

Based on these data, would the federal cigarette tax be considered progressive or regressive? Be sure to define progressive tax and regressive tax in your answer.    3 pts

  1. Suppose the government decides to tax sales of pizza. Show the effect of the tax on the market for pizzas with the help of a graph. Assume the equilibrium price and quantity before the tax was imposed was $10 and 100 units. Per unit tax is $4. After the tax price and quantity are $12 and 80 units.
  2. Answer the following questions from the graph/Draw the graph:                                2 pts
  1. After the tax, what price do sellers receive?             1 pt  
  1. How much revenue is collected by the government? What is the buyers share and what is the sellers share?                             1 pt  
  1. Is there any deadweight loss? Calculate.                 1 pt

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