Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
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Question
Chapter 17, Problem 17.5P
a)
To determine
To find:
Affect on investment decision due to tax.
b)
To determine
To know:
Impact on capital input due to tax on profit.
c)
To determine
To know:
Affect on capital usage due to adoption of accelerated
d)
To determine
To know:
Impact on capital usage due to decrease in corporate tax.
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Students have asked these similar questions
please solvr Question 5
Question 5
A function g(z) is strictly increasing if g'(z) > 0 on its domain. Assume the supply and demand
functions for a high-tech product are
Qs = S(P),
Qp = D(P +T,Y),
%3D
where Y is the income, T is the consumption tax on the product, and P is the price. We don't
specify a particular analytical form of the supply and demand functions, but we assume that
both functions are well defined on their domains and their derivatives exist.
We also assume that S'(P) > 0 on its domain, and that
D(Z,Y) > 0,
D(Z,Y) < 0,
and
az
where Z = P+T.
Assume an equilibrium state exists in the sense that the supply and demand are balanced:
S(P) – D(P +T,Y) = 0.
(1) Assume Pis a function of Y. Is price (P) an increasing or decreasing function of income (Y)?
Show your working steps to support your answer.
(2) Assume Pis a function of T. Is price (P) an increasing or decreasing function of tax (T)? Show
your working steps to support your answer.
using the concept of user cost of capital
illustrate in which cases a corporation tax
will not affect firm investment decisions
Chapter 17 Solutions
Microeconomic Theory
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