d. $80,000 Question 14: Chapter ma2peoBr, Section .122, P Practice Problem 133 1
ID: 1130164 • Letter: D
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d. $80,000 Question 14: Chapter ma2peoBr, Section .122, P Practice Problem 133 14. Chapter ma2pe08r, Section.122, Problem 133 (133.12.2-MC. MANK em 133 (ID: 133.12.2-MC-MANKOB) Suppose the government taxes 30 percent of the first $70,000 and 50 percent ofall income above $70,000. For a person earning $200,000, the marginal tax rate is a. 30 percent, and the average tax rate is 50 percent b. 30 percent, and the average tax rate is 43 percent. c. 50 percent, and the average tax rate is 40 percent. 46,000 d. 50 percent, and the average tax rate is 43 percent. estion 15: Chapter ma2pe08r, Section .121, Problem 093 (ID: 093.12.1-MC-MAN 71,Problem 093 (093.12.1 MC-MANK08)Explanation / Answer
Tax amount should be calculated first by charging the tax rate on respective income.
Tax at 30% rate = $70,000 × 30% = $21,000
Since the first $70,000 income is already come under tax, the remaining income is ($200,000 - $70,000 =) $130,000.
Tax at 50% rate = $130,000 × 50% = $65,000
Total tax amount = Tax at 30% rate + Tax at 50% rate
= $21,000 + $65,000
= $86,000
Marginal tax rate is the rate which is charged on the last dollar of income. Therefore, the marginal tax rate is 50%.
Average tax rate = (Total tax amount / Total income) × 100
= ($86,000 / $200,000) × 100
= 43 percent
Answer: d
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