Given the following tax structure, what is the minimum tax that would need to be assessed on Lizzy to make the tax progressive with respect to average tax rates? What is the minimum tax that would need to be assessed on Lizzy to make the tax progressive with respect to effective tax rates?
Definitions:
Efficiency Loss
Reductions in combined consumer and producer surplus caused by an underallocation or overallocation of resources to the production of a good or service. Also called deadweight loss.
Deadweight Loss
A loss of economic efficiency that occurs when the equilibrium for a good or service is not achieved or is not achievable.
Actual Production
The quantity of goods or services produced by a firm, industry, or economy within a specific period, factual and not estimated.
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