The average tax rate is calculated as
A)total income divided by the total tax paid.
B)the change in total tax paid divided by the change in income.
C)total tax paid divided by total income.
D)the change in income divided by the change in total tax paid.

Question

Quizplus · Accepted Answer

The average tax rate is calculated by dividing the total tax paid by the total income. This gives the proportion of income that is paid in taxes. Option A does the opposite of this calculation. Option B calculates the marginal tax rate, which is the tax rate applied to an additional dollar earned. Option D also calculates the marginal tax rate but in reverse order.

The Average Tax Rate Is Calculated as