Use Figure 1 below to answer questions 22-24. Suppose there are two jurisdictions, A and B.The graphic above shows the market for capital in jurisdiction A. Initially, equilibrium is at pointe on the graph, with equilibrium return Ro and equilibrium quantity of capital in jurisdiction A ofKo. Suppose a property tax, viewed as a tax on capital, is introduced into jurisdiction A at a rateof eg (on the graph) but that property remains untaxed in jurisdiction B.Figure 1RRAabeRRRoсRBdReDeKAKoK22. [3] Suppose we are in the short run and capital is immobile. What is the after-tax return oncapital immediately after the is imposed it is imposed.(a) RA(b) RB(c) Rc(d) RoA

The reason is as follows:Capital is not easily moved in the near term. Consequently, enterprises…

Answered: Use Figure 1 below to answer questions…

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter15: Income Inequality And Poverty

Section: Chapter Questions

Problem 5CQ

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Similar questions

Call a company be guaranteed all of the Social benefits of a new invention? Why or why not?
What are the three ways that societies can organize themselves economically?
In the tradeoff between economic output and environmental protection, what do the combinations on the protection possibility curve represent?
In what ways (it) company investments in research and development create positive externalities?
HighFlyer Airlines wants to build new airplanes with greatly increased cabin space. This will allow HighFlyer Airlines to give passengers more comfort and sell more tickets at a higher price. However, redesigning the cabin means rethinking many other elements of the airplane as well, like engine and luggage placement, and the most efficient shape of the plane for moving through the air. HighFlyer Airlines has developed a list of possible methods to increase cabin space, along with estimates of how these approaches would affect the planes operating costs and ticket sales. Based on these estimates, Table 13.5 shows the value of R, how much should the firm invest in R on top of the private return; that is, an R private return to HighFlyer Airlines would have a 9 social return. How much investment is socially optimal at the 6 interest rate?
Consider two ways of protecting elephants from poachers in African countries. In one approach, the government sets up enormous national parks that have sufficient habitat for elephants to thrive and forbids all local people to enter the parks or to injure either the elephants or their habitat in any way. In a second approach, the government sets up national parks and designates 10 villages around the edges of the park as official tourist centers that become places where tourists can stay and bases for guided tours inside the national park. Consider the different incentives of local villagers-who often are very poor-in each of these plans. Which plan seems more likely to help the elephant population?
What are four responses to the claim that people should not behave in the way described in this chapter?
Explain the logic behind the race to the bottom argument and the likely reason it has not occurred.
The chapter defines private enterprise as a characteristic of market-oriented economies. What would public enterprise be? Hint: It is a characteristic of command economies.
The Gizmo Company is planning to develop new household gadgets. Table 13.4 shows the companys demand for financial capital for research and development of these gadgets, based on expected rates of return from sales. Now, say that every investment would have an additional 5 social benefitâ€”that is, an investment that pays at least a 6 return to the Gizmo Company will pay at least an 11 return for society as a whole; an investment that pays at least 7 for the Gizmo Company will pay at least 12 for society as a whole, and so on. Answer the questions that follow based on this information. If the going interest rate is 9, how much will Gizmo invest in R. How much will the firm invest if it also receives the social benefits of its investment? (Add an additional 5 return on all levels of investment.)
Why might private markets tend to provide too few incentives for the development of new technology?
What is the race to the bottom scenario?

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