$$\begin{array} { c c }
\text { Taxable Income } & \text { Taxes Paid } \
\$ 20,000 & \$ 0 \
40,000 & 2,000 \
60,000 & 4,000 \
80,000 & 8,500
\end{array}$$
-When taxable income rises from $40,000 to $60,000,

Question

$$\begin{array} { c c } 
\text { Taxable Income } & \text { Taxes Paid } \
\$ 20,000 & \$ 0 \
40,000 & 2,000 \
60,000 & 4,000 \
80,000 & 8,500
\end{array}$$
-When taxable income rises from $40,000 to $60,000,

Quizplus · Accepted Answer

The marginal tax rate is the rate at which the last dollar of income is taxed. From $40,000 to $60,000, the taxes paid increase from $2,000 to $4,000, which means an additional $2,000 in taxes on an additional $20,000 of income, resulting in a marginal tax rate of 10% ($2,000/$20,000). The average tax rate is the total taxes paid divided by the total income. At $60,000, the taxes paid are $4,000, so the average tax rate is 6.67% ($4,000/$60,000). Therefore, the marginal tax rate (10%) is greater than the average tax rate (6.67%).

-When Taxable Income Rises from $40,000 to $60,000, A)Your Average

-When Taxable Income Rises from $40,000 to $60,000,
A)Your Average