EC 102: Principles of Microeconomics

Workshop # 5

1. For each of the following explain whether the tax is proportional, progressive, or regressive:

a. The federal personal income tax in the U.S.

b. The state sales tax in Colorado.

c. A 1% tax on income at all levels that is a surcharge for a universal health care system.

2. Consider each of the following cases:

• Amount that can be produced with one unit of resources

Wine (liters) Cloth (yards)

England 10 20

France 5 5

(i) Using the concept of opportunity cost describe the pattern of comparative advantage?

(ii) On the basis of the pattern of comparative advantage, which country will specialize in which good?

• Amount that can be produced with one unit of resources

Wine (liters) Cloth (yards)

England 20 10

France 40 20

(i) Using the concept of opportunity cost describe the pattern of comparative advantage?

(ii) On the basis of the pattern of comparative advantage, which country will specialize in which good?

c. Amount that can be produced with one unit of resources

Wine (liters) Cloth (yards)

England 20 10

France 40 80

(i) Using the concept of opportunity cost describe the pattern of comparative advantage?

(ii) On the basis of the pattern of comparative advantage, which country will specialize in which good?