Which Statement Is Correct with Respect to Marginal and Average

question 122

Multiple Choice

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

• A)At very high levels of taxable income,a taxpayer's marginal and average tax rates will be the same.
• B)At very low levels of taxable income,a taxpayer's marginal and average tax rates will be the same.
• C)For most taxpayers,the average tax rate is larger than the marginal tax rate.
• D)Generalizations cannot be made.The question can only be answered with reference to the tax situation of a specific taxpayer.

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Definitions:

Distillation Unit

A piece of equipment used in the process of separating components or substances from a liquid mixture through selective boiling and condensation.

CCA Rate

The abbreviation for Capital Cost Allowance rate, which is the rate at which a business can claim depreciation on certain assets for tax purposes.

After-Tax Lease Payment

Lease payments adjusted for tax effects, representing the actual cash outflow for the lessee after considering tax deductions or liabilities.

Tax Rate

The proportion of income that an individual or corporation must pay as taxes.