Suppose the Government Imposes a Tax of 10 Percent on the First

question 312

Multiple Choice

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000. What are the tax liability and the marginal tax rate for a person whose income is $30,000?

• A)both are 10 percent
• B)10 percent and $2,000, respectively
• C)$3,000 and 10 percent, respectively
• D)$3,000 and 20 percent, respectively

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Definitions:

Quantity

The amount or number of a material or immaterial good that is measured or counted.

Market Price

The price at which goods and services are currently being sold in the market, influenced by supply and demand.

Equilibrium Price

The price point in the market at which the amount of goods being offered is equal to the amount of goods being sought.

Quantity Supplied

The volume of a commodity or service that sellers are ready and capable of providing at a specific price within a given period.