Which of the following best describes the relationship of ART to MRT?

The selection of the statement describing the relationship between Average Tax Rate (ART) and Marginal Tax Rate (MRT) as accurate is based on the definitions and implications of these concepts.

Average Tax Rate (ART) is calculated by taking the total amount of taxes paid divided by the total income or the total taxable base. It reflects the average percentage of income that is paid in taxes across the entire income level considered.

On the other hand, the Marginal Tax Rate (MRT) refers to the rate applied to the next dollar of income earned. It indicates how much additional tax will be paid based on an increase in income. This rate is crucial for understanding the impact of tax policies on individual decisions, such as whether to work more hours or take on additional income.

Therefore, the distinction lies in the roles they play within the tax system: ART provides an overview of what individuals have paid in taxes on average, while MRT focuses on changes in tax liabilities and is particularly important in scenarios of income changes. This means that ART provides a broader picture of tax burdens, while MRT is concerned with the effects of incremental income.

The incorrect options do not accurately capture the relationship between ART and MRT. For instance, stating that ART typically equals MRT at