Which of the following is true?
i.If supply is perfectly inelastic,the tax creates no deadweight loss.
ii.The elasticities of supply and demand,not Congress,determine who pays the income tax.
iii.A tax is progressive if the average tax rate falls with income.
A) only i
B) only ii
C) only iii
D) ii and iii
E) i and ii

Question

Quizplus · Accepted Answer

If supply is perfectly inelastic, the quantity supplied does not change with price, so a tax does not create a deadweight loss. The elasticities of supply and demand determine the tax incidence, not legislative decisions. A progressive tax is one where the average tax rate increases with income, not decreases.

Which of the Following Is True