Find the mean average tax rate for the population

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Reference no: EM131203934

Consider a tax system where the first $5,000 of income is tax free, the next $10,000 is taxed at 25 percent, and all income above $15,000 is taxed at 50 percent. There is a population of consumers with who earn wages between $2 and $32 per hour. Wages are uniformly distributed in the population. All consumers have preferences described by U = log(C) - L/1;000:

a. Find the mean average tax rate for the population.

b. Find the mean marginal tax rate for the population. How do these mean rates differ from the actual rates?

Reference no: EM131203934

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