Average corporate tax rates Using the corporate tax rate schedule given in Table 2.1, perform the following:

a. Calculate the tax liability, after-tax earnings, and average tax rates for the following levels of corporate earnings before taxes: $10,000; $80,000; $300,000;

$500,000; $1.5 million; $10 million; and $20 million.

b. Plot the average tax rates (measured on the y axis) against the pretax income levels

(measured on the x axis). What generalization can be made concerning the relationship between these variables?