Question

For each of the following, evaluate if it is a good argument. Provide reasons for why or why not.

16. Tax. Jane is doing an income tax return. There are two different methods of determining some revenues. If method A is used her taxable income will be $50,000. If method B is used, her taxable income will be $56,000. Jane thinks that she better chooses method A.

17. Taxi driver. King is a taxi driver working for a yellow cab company in a developing country. Mostly, the drivers take cash and receipts are not issued. Only King knows how much revenue is generated from fares. King’s wage is 30% of the reported fare revenue. Whatever revenue he reports, he has to turn in that amount to the company first. To maximize his wages, King believes that he wants to over-report the fare revenue to the company.        

18. Saved money? We were looking for a three bedroom house. We were three people. Our budget was $ $240,000 ($80,000 per bedroom). We actually paid $220,000 for a three bedroom house. Soon after, one of us left for another state, and one bedroom is empty.   We saved $20,000, and it is good news for us.

Answer 1

16. Jane's taxable income is $50,000 if she chooses A and $56,000 if she chooses method B. Thus when she chooses method A, it is a good argument because if her taxable income is lower, on which tax is applicable, she will end up paying a lower tax and thus save money. She will only have to pay a certain percent of $50,000. If she had choosen B, she would have had to pay more tax.

17. Drivers take cash and receipts are not issued. King's wage is 30% of the reported fare revenue. He has to report and turn in the amount to the company first. If he over-reports, he will have to turn in more money, which will be out of his pocket. Thus it is not a good argument. On the other hand, he can under - report the fare revenue, keep the entire money which he has under - reported as he will keep 100%, and take the rest 30% of the reported fare revenue.

18. Budget was $80,000 per bedroom. They paid $220,000 / 3 = $73,333 per bedroom. Soon afterwards one of the person's left and one bedroom is empty. So they must have had to pay back the $73,333 to the third person and would have ended up paying $220,000 / 2 = $110,000 for 3 bedrooms each person, which is much more than the $80,000 per bedroom budget. Thus if the third person did not take the money back and kept the bedroom, then it is a good argument, but if the third person took the money back and sold the bedroom, then it would be a bad argument as the two residents end up paying more then their total budget.