The Following Data Represent a Personal Income Tax Schedule

question 25

Multiple Choice

The following data represent a personal income tax schedule. Refer to the above table.If your taxable income is $8000,your average tax rate is:

• A) 25 percent and the marginal rate on additional income is also 25 percent.
• B) 25 percent and the marginal rate on additional income is 40 percent.
• C) 25 percent and the marginal rate on additional income cannot be determined from the information given.
• D) 20 percent and the marginal rate on additional income is 30 percent. At $8000 of taxable income your average tax rate is 25 percent (i.e. ,$2000 tax paid/$8000 income).

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Definitions:

Marginal Productivity Theory

An economic principle that asserts the payment factors of production, like labor and capital, is based on their marginal productivity in the production process.

Wage Differences

The variation in pay for employment that may arise from factors like occupation, experience, education, and sometimes gender or ethnicity.

Median Earnings

The middle value of earnings in a given distribution, such that half of the population earns more and the other half earns less.

Labor Market

The supply of available workers in relation to available work.