Question

Please solve problems in matrix.

3 Section 1.6 Applications Assume this simplistic economic system is broken down into three basic outputs which are Chemicals, Fuel, and Machinery. Chemicals sells 30% of its output to Fuel and 50% to Machinery and consumes the remainder. Fuel sells 80% of its output to Chemical and 10% to Machinery and retains the rest. Machinery sells 40% to Chemicals, 40% to Fuel and retains the rest. Production for each industry is listed down the columns and the purchases for respective industry is read across the rows and in this table. Chemical Fuel Machinery Purchased by Chemical 0.20 0.30 0.50 0.80 0.10 0.10 0.40 0.40 0.20 Fuel Machinery Find the equilibrium price for each sector where its income matches its expenses.

4 1.6 Application Assume a corporation has a taxable income of $10,000,000 At this income level, the federal income tax rate is 50 %, the state income tax rate is 20 %. and the local income tax is 10% If each tax rate is applied to the total taxable income, the resulting tax liability for the corporation would be 80 %. However it is customary to deduct taxes paid to one agency as expense before comput- ing taxes for the other agencies. For example the federal taxes is based on the income that remains after the state and local taxes are deducted, and the state and local taxes are computed in similar fashion. What is the total tax liability for the corporation?

Answer 1

4. Calculating total tax liability:

Particulars	Calculations	Amount ($)
Taxable income		10,000,000
(-) local taxes	$ 10 million x 10%	(1,000,000)
		9,000,000
(-) state taxes	$ 9,000,000 x 20%	(1,800,000)
		7,200,000
(-) federal taxes	$ 7,200,000 x 50%	(3,600,000)
		3,600,000

Therefore, total tax liability of the corporation is = $ 1,000,000 + $ 1,800,000 + $ 3,600,000 = $ 6,400,000