Suppose the government imposes a tax of 10 per cent on the first $30 000 of income, and 20 per cent on all income above $30 000, what is the average tax rate when income is $40 000?

Question

Quizplus · Accepted Answer

The tax on the first $30,000 is 10%, which is $3,000. The tax on the next $10,000 (income above $30,000) is 20%, which is $2,000. The total tax is $5,000. The average tax rate is $5,000/$40,000 = 12.5%.

Suppose the Government Imposes a Tax of 10 Per Cent