Holy cow! The giant manufactory company Whamazon is considering your city to locateits new factory. You are the mayor of the city.Suppose that you estimate the MPC of your city to be 0.67. Suppose further thatWhamazon estimates the immediate new Investment impact upon your city will be $350million.Whamazon is asking for a tax subsidy of $1,000 million ($1 Billion) to locate there.Should you take the offer? Why or why not?Absolutely not. $1 Billion! Your city would end up in the hole the entire $1,000 million.No, your city would end up in the behind $650 million (the $1,000 subsidy minus the $350 newinvestment).Yes, your city comes out ahead $650 million ($1,000 subsidy cost $350 investment)-Yes, your city comes out ahead $1,350 ahead ($1,000 subsidy + $350 investment)Yes, your city comes out ahead $60 million ($1,060 new economic development - $1,000 cost ofthe subsidy).

MPC or Marginal Propensity to Consume. It implies the proportion of an additional increment of…

Holy cow! The giant manufactory company Whamazon is considering your city to locate its new factory. You are the mayor of the city. Suppose that you estimate the MPC of your city to be 0.67. Suppose further that Whamazon estimates the immediate new Investment impact upon your city will be $350 million. Whamazon is asking for a tax subsidy of $1,000 million ($1 Billion) to locate there. Should you take the offer? Why or why not? O Absolutely not. $1 Billion! Your city would end up in the hole the entire $1,000 million. O No, your city would end up in the behind $650 million (the $1,000 subsidy minus the $350 new investment). Yes, your city comes out ahead $650 million ($1,000 subsidy cost $350 investment) - Yes, your city comes out ahead $1,350 ahead ($1,000 subsidy + $350 investment) Yes, your city comes out ahead $60 million ($1,060 new economic development - $1,000 cost of the subsidy).

Holy cow! The giant manufactory company Whamazon is considering your city to locate its new factory. You are the mayor of the city. Suppose that you estimate the MPC of your city to be 0.67. Suppose further that Whamazon estimates the immediate new Investment impact upon your city will be $350 million. Whamazon is asking for a tax subsidy of $1,000 million ($1 Billion) to locate there. Should you take the offer? Why or why not? O Absolutely not. $1 Billion! Your city would end up in the hole the entire $1,000 million. O No, your city would end up in the behind $650 million (the $1,000 subsidy minus the $350 new investment). Yes, your city comes out ahead $650 million ($1,000 subsidy cost $350 investment) - Yes, your city comes out ahead $1,350 ahead ($1,000 subsidy + $350 investment) Yes, your city comes out ahead $60 million ($1,060 new economic development - $1,000 cost of the subsidy).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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