The ultimate burden of the corporate profits tax appears to depend on all of the following except
A. the ease with which capital and labor can be substituted in the corporate and noncorporate sectors.
B. the tax rate structure of the corporate profits tax.
C. the relative capital/labor intensity of the corporate and noncorporate sectors.
D. the elasticities of demand for the products produced in the corporate and noncorporate sectors.
Answer: B
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If significant economies of scale continue as output increases,
a. then small firms enjoy a cost advantage over large firms b. minimum efficient scale is small relative to market demand c. we have the case of a natural monopoly d. the market will disappear in the long run. e. all firms will become large.
The actual multiplier effect in the U.S. economy is less than the multiplier effect in the text examples because:
A. the real-world MPS is larger than the MPS in the examples. B. in addition to saving, households use some of any increase in income to buy imported goods and to pay additional taxes. C. the gap between the nominal interest rate and the real interest rate widens as the economy expands or contracts. D. the MPC in the United States is greater than 1.