Question

As a result of the tax, the government collects how much in tax revenue?

1) $100
2) $500
3) $1000
4) Cannot be determined

Answer 1

The amount of tax revenue collected by the government cannot be determined without specific information on the tax rate and tax base applied. Theoretically, if 10,000 townspeople each paid $300, the total could be up to $3 million, but realistic tax rates would result in less revenue.

Step-by-step explanation:

The student's question about how much the government collects in tax revenue cannot be answered without additional information. To know exactly how much tax revenue is being collected, we would need to know the specific tax rate and the tax base it is being applied to. That said, taxes are the primary way a government collects money (revenue) to fund programs, pay for interest on its debt, and provide goods and services to its citizens. In the example provided, if the tax is collected from 10,000 townspeople who each stand to benefit by $300, theoretically, the total tax revenue could be up to $3 million (10,000 × $300), if a 100% tax rate was applied, which is unrealistic. Real-world tax rates would result in collecting less than this theoretical maximum.