Average corporate tax rates Ordinary income in 2017 was taxed subject to the rates shown in the accompanying table. Using the data in the table, perform the following:

a. Calculate a firm’s tax liability, after-tax earnings, and average tax rate for the following levels of corporate earnings before taxes: $20,000; $70,000; $300,000;

$700,000; $1.2 million; $16 million; and $22 million.

b. Plot the average tax rate (measured on the y-axis) and the pretax income levels

(measured on the x-axis). Explain the relationship between average tax rate and pretax income level.