Jurisdiction Z levies an excise tax on retail purchases of jewelry and watches. The tax equals 3 percent of the first $1,000 of the purchase price plus 1 percent of the purchase price in excess of $1,000.
a. Individual C purchases a watch for $500. Compute C’s excise tax and average excise tax rate.
b. Individual D purchases a watch for $5,000. Compute D’s excise tax and average excise tax rate.
c. Is Jurisdiction Z’s excise tax vertically equitable? Explain briefly.