A Tax Is Progressive If the Average Tax Rate Rises

question 282

True/False

A tax is progressive if the average tax rate rises as income increases.

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Definitions:

Complementary Inputs

Goods or services that are used together in production and whose use is interconnected, such that an increase in demand for one increases the demand for the other.

Marginal Physical Product

The marginal physical product is the change in output resulting from employing one more unit of a particular input, holding other inputs constant.

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to replace more expensive items with cheaper alternatives.

Margin

Margin refers to the difference between the selling price of a good or service and its cost of production, also used to describe profit margin or markup.