An increase in the marginal tax rate,with the average tax rate held constant,will

Question

Quizplus · Accepted Answer

An increase in the marginal tax rate means that the worker will receive less money for each additional hour or unit of work, which will decrease the marginal benefit of working. This decrease in the marginal benefit of working will lead to a decrease in the amount of labor supplied at any real wage, as workers will choose to work fewer hours or not work at all if the after-tax income is not worth the additional effort. The average tax rate is held constant, so it does not affect the decision-making process. Therefore, the correct answer is (C) decrease the amount of labor supplied at any real wage.

An Increase in the Marginal Tax Rate,with the Average Tax