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Assignment 1 1. A local government imposed a new 2 percent tax on the gross receipts of businesses operating within its jurisdiction. XYZ Company, which manufactures soap and other toiletries, responded to the tax by reducing the size of its bars of soap and purchasing a cheaper grade of ingredients. By making these changes, XYZ maintained its before- tax level of profits. Who bears the incidence of the new gross receipts tax? 2. Monroe county levies a tax on the value of real property located within the county. The tax equals 3 percent of the property's assessed value up to $2 million plus 1 percent of the value in excess of $2 million. a. Compute the tax on real property valued at $1.3 million. b. Compute the tax on real property valued at $4.5 million. 3. Mr. and Mrs. J own a dry-cleaning business that generates $125,000 taxable income each year. For the past few years, the couple's federal tax rate on this income has been 32 percent. Congress recently increased the tax rate for next year to 40 percent. a. Based on a static forecast, how much additional revenue will the federal government collect from Mr. and Mrs. J next year? b. How much additional revenue will the government collect if Mr. and Mrs. J respond to the rate increase by working harder and earning $140,000 next year? c. How much additional revenue will the government collect if Mr. and Mrs. J respond to the rate increase by working less and earning only $110,000 next year