If the United States is to reduce poverty by using a negative income tax, the guaranteed income should be
a. two times the tax rate.
b. close to the poverty line.
c. close to the median income of all families.
d. above the poverty line.
b
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A star basketball player signs a contract that newspaper reports say is worth $20 million. The player receives $5 million on signing, and $5 million a year for three years. The contract is worth
A) $20 million as reported in the papers. B) less than $20 million since the present value of $5 million received one or more years from now is less than $5 million. C) more than $20 million because the present value of $5 million received one or more years from now is more than $5 million. D) either more or less than $20 million, depending on the value of the discount rate.
Sally Rand owns a ceiling fan company. She sells 1,000 ceiling fans at $50 each. Each fan costs her $20 . She uses her own money to buy the fans; she withdraws the money from her savings account where it earns 5 percent interest. Before going into the ceiling fan business, she worked as a fan-dancer at $25,000 a year. Should Sally remain in business?