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In Taxland, the first $5,000 earned per year is exempt from taxation. Between $5,000 and $20,000, the tax rate is 10 percent. Between $20,000 and $50,000, it’s 15 percent. Above $50,000, it’s 25 percent. You’re earning $75,000 a year.
Instructions: Round your answers to the nearest whole number.
a. How much in taxes will you have to pay?
$.
b. What is your average tax rate?
percent.
c. What is your marginal tax rate?
What is the Nash equilibrium from the pricing game in Figure 9.2. Is there is a dominant strategy for either? If so, what is it?
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