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.
A) Her average tax rate is 33% and her marginal tax rate is 20%.
B) Her average tax rate is 20% and her marginal tax rate is 33%.
C) Her average tax rate is 20% and her marginal tax rate is 20%.
D) Her average tax rate is 33% and her marginal tax rate is 33%.

Question

Quizplus · Accepted Answer

To find Pat's average tax rate, we divide her total taxes paid by her total income:

Average tax rate = Total taxes paid / Total income = $7,000 / $35,000 = 0.2 or 20%

To find her marginal tax rate, we need to look at how much her taxes would increase if she earned an additional dollar. We know that for every extra dollar she earns, she owes 33 cents in taxes. So her marginal tax rate is 33%.

Pat Calculates That for Every Extra Dollar She Earns,she Owes