Question

Below is the income tax system for the country of Genovia.

For income from $0 to $100, no income tax.

For all income above $100 but less than $400, the tax rate is 20%.

For all income above $400, the tax rate is 40%.

Jane Doe’s income is $500. What is her AVERAGE tax rate?


Group of answer choices


40%


33%


50%


20%


25%

Answer 1

24%

Step-by-step explanation:

The computation of the average tax rate is shown below:

Given that

From income $0 to $100, no income tax is applicable

From income above $100 upto $400, the tax rate is 20%

The income above $400, the tax rate is 40%

So based on the above information

Since the Jane doe income is $500

So here the average tax rate is

= (400 × 0.20) + (100 × 0.40) ÷ $500

= ($80 + $40) ÷ ($500)

= ($120) ÷ ($500)

= 24%

This is the answer but the same is not provided in the given options