Assume there are four people in a city. Person A owns nothing, person B owns a chicken shack worth $10,000, person C owns a small garden worth $130,000 and person D owns a cottage worth $240,000. They want to finance a public children's zoo, a local public good. The zoo will cost $56,000 and should be financed by a property tax with equal tax rates per property value. Calculate the tax rate (in %) for the following cases

a. all four people live in the city.

b. there is a city of four B-like people.

c. there is a city of four C-like people.

d. there is a city of four D-like people.

e. there is a city of only one A, one B and one C (D has left).

Question

Business

Cedric Wilkerson

27 December, 01:20

Assume there are four people in a city. Person A owns nothing, person B owns a chicken shack worth $10,000, person C owns a small garden worth $130,000 and person D owns a cottage worth $240,000. They want to finance a public children's zoo, a local public good. The zoo will cost $56,000 and should be financed by a property tax with equal tax rates per property value. Calculate the tax rate (in %) for the following cases

a. all four people live in the city.

b. there is a city of four B-like people.

c. there is a city of four C-like people.

d. there is a city of four D-like people.

e. there is a city of only one A, one B and one C (D has left).

+2

Answers (1)

Know the Answer?

Giovani Underwood · Answer 1

a) X = 14.7%

b) X = 140%

c) X = 10.76%

d) X = 5.83%

e) X = 40%

Explanation:

As per the data given in the question,

a) Let the tax rate be = X%

then 0 + (X * 10,000) : 100 + (X * 130,000) : 100 + (X * 240,000) : 100 = $56,000

100X+1,300X+2,400X = $56,000

X = $56,000:3,800

= 14.7%

b) ((X * 10,000) : 100) * 4 = $56,000

400X = $56,000

X = 140%

c) ((X * 130,000) : 100) * 4 = $56,000

5,200 X = $56,000

X = 10.76%

d) ((X * 240,000) : 100) * 4 = $56,000

9,600 X = $56,000

X = 5.83%

e) X * 0 + (X * 10,000) : 100 + (X * 130,000) : 100 = $56,000

1,400 X = $56,000

X = 40%