Suppose $T = .02 I ^ { \alpha }$
.If taxes are progressive which of the following is true?

Question

Suppose $T = .02 I ^ { \alpha }$
 .If taxes are progressive which of the following is true?
A) $\alpha$>1
B) $0<\alpha<1$
C) $\alpha= 1$
D) $\alpha = 0$

Quizplus · Accepted Answer

If taxes are progressive, it means that the tax rate increases as the income of an individual increases. Therefore, as the income increases, the value of T should also increase. This can only happen if $\alpha$ is greater than 1, as raising a number greater than 1 to a power greater than 1 will result in a larger number. Therefore, the correct choice is A) $\alpha$>1.

Suppose T=.02IαT = .02 I ^ { \alpha }T=.02Iα If Taxes Are Progressive Which of the Following Is True

Suppose $T = .02 I ^ { \alpha }$ If Taxes Are Progressive Which of the Following Is True