Ron works full time as a teacher making $50,000 while his wife Ellen stays at home taking care of their two children. Ron's income puts the family in a tax bracket with a 40 percent marginal tax rate. Ellen receives a full-time job offer as an administrative assistant making $30,000 per year, however to take the job would require the family to start paying $8,000 per year in child care expenses. If Ellen were to accept the job offer, after paying taxes and subtracting child care expenses, by how much would the family's net disposable income increase?
A) $8,000
B) $10,000
C) $20,000
D) $30,000

Question

Quizplus · Accepted Answer

If Ellen were to accept the job offer, she would make $30,000 per year. After paying taxes at a 25% marginal tax rate, she would have $22,500 left. The family's total income would be $50,000 + $22,500 = $72,500. However, they would now have to pay $8,000 per year in child care expenses. Subtracting this expense, the family's net disposable income would increase by $14,500. ($72,500 - $50,000 - $8,000 = $14,500)

Ron Works Full Time as a Teacher Making $50,000 While