Question 1

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000. What is the average tax rate when income is $50,000?

Accepted Answer

The answer of Suppose the government imposes a tax of...

Question 2

Maurice faces a progressive federal income tax structure that has the following marginal tax rates: 0 percent on the first $10,000, 10 percent on the next $10,000, 15 percent on the next $10,000, 25 percent on the next $10,000, and 50 percent on all additional income. In addition, he must pay 5 percent of his income in state income tax and 15.3 percent of his labor income in federal payroll taxes. Maurice earns $60,000 per year in salary and another $10,000 per year in non-labor income. What is his average tax rate?

Accepted Answer

The answer of Maurice faces a progressive federal income tax...

Question 3

Which of the following statements is correct?

Accepted Answer

The average tax rate measures the overall sacrifice a taxpayer makes in terms of percentage of their income, while the marginal tax rate measures the impact of an additional dollar earned on the taxpayer's tax liability. The marginal tax rate can also affect consumer decisions, as it can discourage people from working more or taking on additional income due to the increased tax liability on those additional earnings.

Question 4

The income tax requires that taxpayers pay 10 percent on the first $50,000 of income and 20 percent on all income over $50,000. Andy paid $9,000 in taxes. What were his marginal and average tax rates?

Accepted Answer

Andy's marginal tax rate is 20 percent because he pays 20 percent on income over $50,000. His average tax rate is 13 percent because he paid $9,000 in taxes on his total income, which is $70,000 (calculated as $5,000 on the first $50,000 and $4,000 on the remaining $20,000), resulting in an average rate of $9,000/$70,000 = 0.13 or 13 percent.

Question 5

If your income is $40,000 and your income tax liability is $5,000, your

Accepted Answer

The answer of If your income is $40,000 and your...

Question 6

The average tax rate measures the

Accepted Answer

The average tax rate measures the fraction of income paid in taxes.

Question 7

Suppose the government imposes a tax of 20 percent on the first $50,000 of income and 30 percent on all income above $50,000. What is the average tax rate when income is $60,000?

Accepted Answer

The tax on the first $50,000 is 20%, which is $10,000. The tax on the remaining $10,000 (from $50,000 to $60,000) is 30%, which is $3,000. The total tax is $13,000. The average tax rate is $13,000 divided by $60,000, which is approximately 21.7 percent.

Question 8

Pat calculates that for every extra dollar she earns, she owes the government 33 cents. Her total income now is $35,000, on which she pays taxes of $7,000. Determine her average tax rate and her marginal tax rate.

Accepted Answer

Average tax rate = Total taxes paid / Total income = $7,000 / $35,000 = 0.2 or 20%
Marginal tax rate = Tax rate on the next dollar earned = 33%

Question 9

Pat calculates that for every extra dollar she earns, she owes the government 40 cents. Her total income now is $44,000, on which she pays taxes of $11,000. Determine her average tax rate and her marginal tax rate.

Accepted Answer

Average tax rate = Total taxes paid / Total income 
= $11,000 / $44,000 
= 0.25 or 25%
 
Marginal tax rate refers to the tax rate applicable on the next dollar of income. As Pat owes 40 cents on every extra dollar earned, her marginal tax rate would be 40%. So, the correct option is (D).

Question 10

Suppose that the government taxes income in the following fashion: 30 percent of the first $20,000, 50 percent of the next $30,000, and 60 percent of all income over $50,000. Ted earns $40,000, and Robin earns $60,000. Which of the following statements is correct?

Accepted Answer

The answer of Suppose that the government taxes income in...

Question 11

Suppose the government taxes 25 percent of the first $60,000 of income and 40 percent of all income above $60,000. For a person earning $200,000, the marginal tax rate is

Accepted Answer

The marginal tax rate is the tax rate on the last dollar earned. For a person earning $200,000, the last dollar earned is in the 40% tax bracket, so the marginal tax rate is 40%. The average tax rate is the total tax paid divided by the total income. For a person earning $200,000, the total tax paid is $60,000 x 0.25 + $140,000 x 0.40 = $72,000. The average tax rate is $72,000 / $200,000 = 36%.

Question 12

Suppose the government taxes 10 percent of the first $40,000 of income and 20 percent of all income over $40,000. Shahina paid $10,000 in taxes. What were her marginal and average tax rates?

Accepted Answer

The answer of Suppose the government taxes 10 percent of...

Question 13

Bert faces a progressive tax structure that has the following marginal tax rates: 0 percent on the first $10,000, 10 percent on the next $10,000, 15 percent on the next $10,000, 25 percent on the next $10,000, and 50 percent on all additional income. If Bert earns $75,000, what is his average tax rate?

Accepted Answer

The answer of Bert faces a progressive tax structure that...

Question 14

Costas faces a progressive federal income tax structure that has the following marginal tax rates: 0 percent on the first $10,000, 10 percent on the next $10,000, 15 percent on the next $10,000, 25 percent on the next $10,000, and 50 percent on all additional income. In addition, he must pay 5 percent of his income in state income tax and 15.3 percent of his labor income in federal payroll taxes. Costas earns $70,000 per year in salary and another $20,000 per year in non-labor income. What is his average tax rate, and what is his marginal tax rate on his salary?

Accepted Answer

The answer of Costas faces a progressive federal income tax...

Question 15

Suppose that the government taxes income in the following fashion: 20 percent of the first $50,000, 40 percent of the next $50,000, and 60 percent of all income over $100,000. Marshall earns $200,000, and Lily earns $600,000. Which of the following statements is correct?

Accepted Answer

Lily's income places her in the highest tax bracket for a portion of her income, which increases her average tax rate compared to Marshall, who has a portion of his income taxed at lower rates. Marshall's marginal tax rate (the rate on the last dollar earned) is the same as Lily's if we only consider the given tax brackets, but Lily's average tax rate (total tax paid divided by total income) is higher because a larger portion of her income is subject to the highest tax rate.

Question 16

Suppose the government taxes 30 percent of the first $70,000 and 50 percent of all income above $70,000. For a person earning $100,000, the marginal tax rate is

Accepted Answer

The marginal tax rate is the tax rate applied to the last dollar earned, which in this case is the income above $70,000. Therefore, the marginal tax rate for a person earning $100,000 is 50 percent since all income above $70,000 is taxed at that rate.

To calculate the average tax rate, we need to find the total amount of taxes paid and divide it by the total income. The first $70,000 is taxed at a rate of 30 percent, so the tax on that amount is:

$70,000 × 0.30 = $21,000

The remaining $30,000 is taxed at a rate of 50 percent, so the tax on that amount is:

$30,000 × 0.50 = $15,000

Therefore, the total amount of taxes paid is:

$21,000 + $15,000 = $36,000

The total income is $100,000, so the average tax rate is:

$36,000 ÷ $100,000 = 0.36 or 36 percent

Therefore, the correct answer is D, 50 percent marginal tax rate and 36 percent average tax rate.

Question 17

The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Emily paid $9,000 in taxes. What were her marginal and average tax rates?

Accepted Answer

Emily's marginal tax rate is 20 percent because she pays 20 percent on income over $40,000. Her average tax rate is calculated by dividing total taxes paid ($9,000) by her total income. If she paid $9,000 in taxes, she must have earned $60,000 ($4,000 from the first $40,000 at 10% and $5,000 from the remaining $20,000 at 20%). Thus, her average tax rate is $9,000/$65,000 = 13.8 percent.

Question 18

Suppose the government taxes 30 percent of the first $70,000 and 50 percent of all income above $70,000. For a person earning $200,000, the marginal tax rate is

Accepted Answer

For the person earning $200,000, the taxes will be calculated as follows:
30% of first $70,000 = $21,000
50% of remaining $130,000 = $65,000

Total taxes paid = $21,000 + $65,000 = $86,000

Marginal tax rate is the tax rate on the last dollar earned, which is 50% in this case.
Average tax rate is the total taxes paid divided by total income, which is ($86,000/$200,000) = 43%.

Therefore, the correct choice is D.

Question 19

The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Karen paid $6,000 in taxes. What were her marginal and average tax rates?

Accepted Answer

Karen's marginal tax rate is 20 percent because this is the rate she pays on any income over $40,000. To find her average tax rate, we calculate the total tax paid ($6,000) as a percentage of her total income. Since she paid $6,000, which is $2,000 more than what she would have paid on the first $40,000 (10% of $40,000 = $4,000), she must have earned $10,000 at the 20% rate (since $2,000 is 20% of $10,000). Therefore, her total income was $50,000 ($40,000 + $10,000), and her average tax rate is $6,000/$50,000 = 12%.

Question 20

The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Karen paid $6,000 in taxes. What were her marginal and average tax rates?

Accepted Answer

Karen's marginal tax rate is 20 percent because this is the rate she pays on any income over $40,000. To find her average tax rate, we calculate the total tax paid ($6,000) as a percentage of her total income. Since she paid $6,000, which is $2,000 more than what she would have paid on the first $40,000 (10% of $40,000 = $4,000), she must have earned $10,000 at the 20% rate (since $2,000 is 20% of $10,000). Therefore, her total income was $50,000 ($40,000 + $10,000), and her average tax rate is $6,000/$50,000 = 12%.

Quiz 12: The Design of the Tax System

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000. What is the average tax rate when income is $50,000?

Which of the following statements is correct?

The income tax requires that taxpayers pay 10 percent on the first $50,000 of income and 20 percent on all income over $50,000. Andy paid $9,000 in taxes. What were his marginal and average tax rates?

If your income is $40,000 and your income tax liability is $5,000, your

The average tax rate measures the

Suppose the government imposes a tax of 20 percent on the first $50,000 of income and 30 percent on all income above $50,000. What is the average tax rate when income is $60,000?

Pat calculates that for every extra dollar she earns, she owes the government 33 cents. Her total income now is $35,000, on which she pays taxes of $7,000. Determine her average tax rate and her marginal tax rate.

Pat calculates that for every extra dollar she earns, she owes the government 40 cents. Her total income now is $44,000, on which she pays taxes of $11,000. Determine her average tax rate and her marginal tax rate.

Suppose that the government taxes income in the following fashion: 30 percent of the first $20,000, 50 percent of the next $30,000, and 60 percent of all income over $50,000. Ted earns $40,000, and Robin earns $60,000. Which of the following statements is correct?

Suppose the government taxes 25 percent of the first $60,000 of income and 40 percent of all income above $60,000. For a person earning $200,000, the marginal tax rate is

Suppose the government taxes 10 percent of the first $40,000 of income and 20 percent of all income over $40,000. Shahina paid $10,000 in taxes. What were her marginal and average tax rates?

Suppose that the government taxes income in the following fashion: 20 percent of the first $50,000, 40 percent of the next $50,000, and 60 percent of all income over $100,000. Marshall earns $200,000, and Lily earns $600,000. Which of the following statements is correct?

Suppose the government taxes 30 percent of the first $70,000 and 50 percent of all income above $70,000. For a person earning $100,000, the marginal tax rate is

The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Emily paid $9,000 in taxes. What were her marginal and average tax rates?

Suppose the government taxes 30 percent of the first $70,000 and 50 percent of all income above $70,000. For a person earning $200,000, the marginal tax rate is

The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Karen paid $6,000 in taxes. What were her marginal and average tax rates?

The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Karen paid $6,000 in taxes. What were her marginal and average tax rates?