What is the difference between the average and marginal tax rates' effects on the labour supply?

Question

Quizplus · Accepted Answer

The average tax rate is the total amount of taxes paid divided by the total income earned. An increase in the average tax rate reduces the net income earned for each hour worked, which makes working more to earn more income less attractive. However, the marginal tax rate is the tax rate paid on the last dollar earned. An increase in the marginal tax rate reduces the net income earned for that additional hour of work, which makes that additional hour of work less attractive. Therefore, an increase in the average tax rate decreases labour supply, whereas an increase in the marginal tax rate decreases the incentive to work more hours. This means that people might prefer to work fewer hours because their after-tax income will not increase as much.

What Is the Difference Between the Average and Marginal Tax