Tom, Age 13, Is Claimed as a Dependent by His

question 1

Multiple Choice

Tom, age 13, is claimed as a dependent by his parents.Tom has unearned income of $3,400 and $300 of income from mowing lawns in the neighborhood.If the first $2,550 of Tom's net unearned income is taxed at 10%, what is Tom's 2018 income tax liability?

• A)$0
• B)$265
• C)$459
• D)$370
• E)None of the above

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Definitions:

Von Neumann-Morgenstern Utility Function

A utility function theory based on expected utility, fundamental in making rational decisions under uncertainty, emphasizing outcomes' probabilities.

Probability

The measure of the likelihood that an event will occur.

Expected Utility

A concept in economics and finance that calculates the anticipated utility of different choices, taking into account the various possible outcomes and their probabilities.

Expected Utility Function

A mathematical representation of a decision-maker's preference over uncertain outcomes, emphasizing the expected level of satisfaction or value.