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The state of Indiana charges a retail sales tax of 7%. Consider the following information for three households:
Household 1: Income: 150,000 Consumption: 45,000
Household 2: Income: 80,000 Consumption: 40,000
Household 3: Income 30,000 Consumption 21,000
a. Calculate tax liability for each household.
b. What is the average tax rate for each household?
c. What is the marginal tax rate for each household?
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