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 are the tax liability and the marginal tax rate for a person whose income is $50,000?

Question

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The tax liability is calculated as 10% of the first $40,000 ($4,000) plus 20% of the remaining $10,000 ($2,000), totaling $6,000. The marginal tax rate, which is the rate applied to the last dollar earned, is 20% for income above $40,000.

Suppose the Government Imposes a Tax of 10 Percent on the First