Given the Following Tax Structure,what Is the Minimum Tax That

question 56

Essay

Given the following tax structure,what is the minimum tax that would need to be assessed on Dora to make the tax progressive with respect to average tax rates? What is the minimum tax that would need to be assessed on Dora to make the tax progressive with respect to effective tax rates?
$\begin{array}{|c|r|r|r}\hline \text { Taxpayer } & \text { Salary } & \text { Muni-Bond Interest } & {\text { Total Tax }} \\\hline \text { Diego } & 30,000 & 10,000 &1,500 \\\hline \text { Dora } & 50,000 & 5,000 &???\\\hline\end{array}$

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Definitions:

Fixed Input

An input whose quantity is constant and cannot be changed in the short run.

Short Run

A period in economics during which some factors of production are fixed, limiting the ability of a business to fully adjust to market changes.

Long Run

An economic term referring to a period during which all inputs or factors of production can be varied, and there are no fixed constraints.

Average Fixed Costs

The fixed costs (those not changing with output level) of production divided by the quantity of output produced.