Microeconomics,, 16th Canadian Edition

Problems

10. Consider an income-tax system that has four tax brackets. The

following table shows the marginal tax rate that applies to the

income in each tax bracket.

Earned Income Tax Rate in Bracket

Up to $20 000 0%

$20 001–$40 000 15%

$40 001–$80 000 30%

$80 001 and higher 35%

a. Create a table and compute the average income-tax rate

at income levels $10 000, $20 000, and each increment of

$10 000 up to $120 000.

b. On the table, indicate the marginal income-tax rate for

each level of income in part (a).

c. On a graph with the tax rates on the vertical axis and

income on the horizontal axis, plot the average and