Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000.What is the average tax rate when income is $50,000

Question

Quizplus · Accepted Answer

To calculate the average tax rate, we need to find the total tax paid and divide it by the total income.

For an income of $50,000, the tax paid on the first $40,000 would be:

10% x $40,000 = $4,000

The remaining $10,000 is taxed at 20%, which equals:

20% x $10,000 = $2,000

So the total tax paid would be $4,000 + $2,000 = $6,000.

To find the average tax rate, we divide the total tax paid by the total income:

$6,000 ÷ $50,000 = 0.12 or 12%

Therefore, the answer is B) 12 percent.

Suppose the Government Imposes a Tax of 10 Percent on the First