Question

question 1 (multiple choice worth 5 points)
(mc)

suppose you live in a country with a proportional tax system. you make $20,000 a year and pay $5,000 in taxes. your friend makes twice as much money as you. what amount can your friend expect to pay in taxes this year?

$2,500
$5,000
$10,000
$20,000

Explanation:

Identify the given values

We are given:

• Your income: \(I_{\text{you}} = \$20,000\)
• Your taxes paid: \(T_{\text{you}} = \$5,000\)
• Your friend's income: \(I_{\text{friend}} = 2 \times I_{\text{you}}\)

Calculate the tax rate

Using the Tax Systems knowledge point

$$ \text{Tax Rate} = \frac{T_{\text{you}}}{I_{\text{you}}} = \frac{\$5,000}{\$20,000} = 0.25 \text{ or } 25\% $$

Determine your friend's income

Your friend makes twice as much money as you:

$$ I_{\text{friend}} = 2 \times \$20,000 = \$40,000 $$

Calculate your friend's tax payment

Using the Tax Systems knowledge point

$$ T_{\text{friend}} = I_{\text{friend}} \times \text{Tax Rate} = \$40,000 \times 0.25 = \$10,000 $$

Answer:

• (A) $2,500
• (B) $5,000
• (C) $10,000 (Correct answer)
• (D) $20,000