If the Supply of Capital Is Perfectly Elastic, the Incidence

question 63

Multiple Choice

If the supply of capital is perfectly elastic, the incidence of a tax on capital income is

• A) shared, but not equally, between firms that demand capital and the suppliers of capital.
• B) paid entirely by firms that demand capital.
• C) paid entirely by the suppliers of capital.
• D) shared equally between firms that demand capital and the suppliers of capital.
• E) unknown.

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Definitions:

Risk Level

The degree of uncertainty and the potential financial loss associated with an investment or business decision.

Net Present Value

An evaluation metric that analyzes the profitability of a projected investment by discounting future cash flows to their present value and subtracting the initial investment cost.

Project Rate of Return

The expected return on an investment, estimating the profitability of a project or investment.

Fund Utilization

The process of using allocated funds or resources efficiently for intended purposes.