Use the letters noted below to identify the type of tax in the following situations.

(A) Progressive tax - takes a larger percentage of income from high-income groups. (B) Proportional tax - takes the same percentage of income from all income groups. (C) Regressive tax - takes a larger percentage of income from low-income groups.

____1. Sandra has an income of $32,000 and Adrienne has an income of $33,000. Both pay a 6% motor vehicle sales tax on their new cars.

____2. Tim has an income of $11,000 and Peggy has an income of $40,000. Both pay personal property tax of $100 because they have the same make of car.

____3. Marilyn earns $41,000 annually and Fred earns $41,500 annually. Both smoke 2 packs of cigarettes a day and both pay a tax of 41 cents a pack.

___4. Bill earns $500,000 annually and Morgan earns $10,000 annually. Both pay a 40-cent gasoline tax for each gallon purchased.

____5. Jennifer earns $12,000 annually and pays $120 in income taxes while Jason earns $70,000 annually and pays $800 in income taxes.

6. Define a lump-sum tax. Describe how a lump sum tax levied on a firm affects each of the following: a. a firm's profit-maximizing level of output

b. a firm's profits?

c. Efficiency in the market

7. Define a per unit tax. Describe how a lump sum tax levied on a firm affects each of the following:

a. a firm's profit-maximizing level of output

b. a firm's profits?

c. Efficiency in the market