Assume the marginal tax rate for income above $25000 has risen to 30 percent.If the tax rate for the income less than $25000 is 10 percent,what is the average tax rate for a person with an income of $40,000?

Question

Quizplus · Accepted Answer

The amount of income taxed at 10% is $25,000, so the tax paid on that portion is $2,500. The amount of income taxed at 30% is $15,000 ($40,000 - $25,000), so the tax paid on that portion is $4,500. 
The total tax paid is $2,500 + $4,500 = $7,000.
 
The average tax rate is total tax paid divided by the income, which is $7,000/$40,000. 
Therefore, the average tax rate is 17.5%. So, the correct answer is C.

Assume the Marginal Tax Rate for Income Above $25000 Has