Refer to Scenario 19.2 below to answer the question(s) that follow.
SCENARIO 19.2: An individual earning $40,000 pays $3,200 in taxes. The marginal tax rate on any income earned above $40,000 is 20%.
-Refer to Scenario 19.2. When this person earns $40,000, her average tax rate is

Question

Quizplus · Accepted Answer

The average tax rate is calculated by dividing the total amount of taxes paid by the total income. In this scenario, the individual pays $3,200 in taxes on an income of $40,000. Therefore, the average tax rate is $3,200 / $40,000 = 0.08, or 8%.