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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

Use the following table to answer questions 1-4:

images

3. What is the marginal tax rate on the 10,001st dollar? What is the marginal tax rate on the 10,000th dollar?

To determine

Identify the marginal rate of tax.

Explanation

As per the given table, people who earn $10,000 have to pay $500 plus 12% of everything over $5,000 as tax.  Since the income is $10,000, 12% of $5,000 ($10,000-$5,000) is $600($5,000×12/100). Therefore, the total amount of tax is $600 plus $500 that is $1,100.  Hence, the marginal rate for the $10,000th dollar is 12%

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