Which statement is correct with respect to marginal and average tax rates under a progressive tax structure?

Question

Quizplus · Accepted Answer

At very low levels of taxable income, a taxpayer's marginal and average tax rates will be the same, as they will only be paying the lowest tax rate applicable to them. As the taxable income increases, the marginal tax rate will increase, while the average tax rate may or may not increase, depending on the tax brackets and rates applicable to the taxpayer. At very high levels of taxable income, a taxpayer's marginal tax rate may be much higher than the average tax rate, as they will be subject to the highest tax bracket and rate, but their average tax rate may be lower than the marginal rate, as it is calculated based on the total taxable income and tax liability. Therefore, option D is the correct statement, and the other options are either incorrect or too general to apply to all taxpayers.

Which Statement Is Correct with Respect to Marginal and Average