Explain how changes in corporate taxes affect the investment decisions of firms
What will be an ideal response?
Changes in corporate taxes change the user cost of capital, which changes the desired capital stock and investment. If corporate taxes increase, the user cost of capital increases, which will reduce the desired capital stock and reduce investment. Decreases in corporate taxes will decrease the user cost of capital, which then increases the desired capital stock and increases investment.
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Refer to Table 2-17. What is Lucy's opportunity cost of making a wagon?
A) 3 wagons B) 3/4 of a wagon C) 1 1/3 tricycles D) 2 tricycles
Developing country governments often collaborate with foreign companies in
a. choosing inappropriate technologies b. transferring assets back home during foreign exchange crises c. promoting corporate goals over development goals d. avoiding taxes e. all of the above