If a Factor of Production Has Many Close Substitutes, We

question 67

Multiple Choice

If a factor of production has many close substitutes, we would expect that its price elasticity of demand would be

• A) unity.
• B) zero.
• C) greater than one.
• D) less than one, but greater than zero.

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Definitions:

Progressive Tax Structure

A tax system in which the tax rate increases as the taxable amount or income increases, placing a heavier burden on those who can afford to pay more.

Marginal Tax Rate

The rate at which an additional dollar of income is taxed.

Vertical Equity

A principle in taxation that says taxpayers with a higher ability to pay should contribute more in taxes.

Marginal Tax Rate

The rate at which an additional dollar of income is taxed, representing the percentage of tax applied to your last dollar of income.