Determining tax progressivity using average tax rates

Steps:

• Calculate average tax rate (ATR) as tax paid divided by income for each level.
• $5,000 income: ATR = 500 / 5,000 = 10%.
• $10,000 income: ATR = 2,500 / 10,000 = 25%.
• $20,000 income: ATR = 9,000 / 20,000 = 45%.
• ATR rises steadily (10% to 25% to 45%), showing consistent progressivity.

Why A is correct:

• A continuously progressive tax system has average tax rates that increase with every higher income level, matching the steady rise here per standard economic definition.

Why the others are wrong:

• B: No initial proportional phase (constant ATR); rates increase immediately, not stay flat then fall.
• C: No regressive phase after progressivity; rates continue rising without decreasing.
• D: No initial regressive phase (falling ATR); rates rise from the start, not fall then rise.

Final answer: A