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 $60,000, her average tax rate is

Question

Quizplus · Accepted Answer

The average tax rate is calculated by dividing the total taxes paid by the total income. Initially, the person pays $3,200 on $40,000. For the additional $20,000 earned, the tax is 20% of $20,000, which is $4,000. The total tax is $3,200 + $4,000 = $7,200. The average tax rate is $7,200 / $60,000 = 12%.