A tax elasticity of supply equal to zero indicates that

Question

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A tax elasticity of supply equal to zero means that workers are not responsive to changes in tax rates and will not cut back on their hours worked. This suggests that there is no substitute for labor and no alternative for workers to increase their income. Therefore, the quantity supplied of labor remains the same at all tax rates. Choice A is incorrect because a tax elasticity of supply equal to zero does not mean that employers will not hire any workers if tax rates increase. Choice B is incorrect because it suggests that the quantity supplied of labor will increase when tax rates increase, which contradicts the assumption of zero elasticity.

A Tax Elasticity of Supply Equal to Zero Indicates That