Pat calculates that for every extra dollar she earns, she owes the government 33 cents. Her total income now is $35,000, on which she pays taxes of $7,000. Determine her average tax rate and her marginal tax rate.
A)Her average tax rate is 33 percent and her marginal tax rate is 20 percent.
B)Her average tax rate is 20 percent and her marginal tax rate is 33 percent.
C)Her average tax rate is 20 percent and her marginal tax rate is 20 percent.
D)Her average tax rate is 33 percent and her marginal tax rate is 33 percent.

Question

Quizplus · Accepted Answer

Average tax rate = Total taxes paid / Total income = $7,000 / $35,000 = 0.2 or 20%
Marginal tax rate = Tax rate on the next dollar earned = 33%

Pat Calculates That for Every Extra Dollar She Earns, She