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Suppose, as in the federal income tax code for the United States, that the representative consumer faces a wage income tax with a standard deduction. That is, the representative consumer pays no tax on wage income for the first x units of real wage income, and then pays a proportional tax t on each unit of real wage income greater than x. Therefore, the consumer’s budget constraint is given by C = w(h ? l) + ? if w(h ? l) ? x, or C = (1 ? t)w(h ? l) + tx + ? if w(h ? l) ? x. Now, suppose that the government reduces the tax deduction x. Using diagrams, determine the effects of this tax change on the consumer, and explain your results in terms of income and substitution effects. Make sure that you consider two cases. In the first case, the consumer doesn’t pay any tax before x is reduced, and in the second case, the consumer pays a positive tax before x is reduced.
Suppose a consumer live two periods, in the first have an income m1 = 30 and in the second an income of m2 = 20. Suppose the interest rate is 10% and can borrow and lend at that interest rate. What is the maximum quantity he can consume in the first ..
Suppose that the government imposes a temporary tarpon all imports, which makes imports more expensive relative to domestic residents (reducing the trade balance for any fixed level of the real exchange rate). Discuss the implications of this policy ..
Do unexpected monopolistic profits serve any useful function in a market economy? Could additional oil revenue be used to explore and develop new fields?
If the economy decides to achieve the Golden Rule level of capital also actually reaches it, illustrate what will be the marginal product of capital.
q1. assume that the autarky charge of commodity x is 10 in nation a 8 in nation b as well as 6 in nation c as well as
Mike’s Mechanical Men produces radio controlled robots. If its average costs of production are $25, its fixed costs equal $2,500, and it charges $75 per robot, how much revenue must be generated to earn a profit of $5,000?
In the 1790 Thomas Malthus predicted mass starvation because he believed population would always grow faster than out ability to increase agricultural production. Explain his theory in terms of diminishing returns to labor in the short run.
You are the manager of a local sporting goods store and recently purchased a shipment of 60 sets of skis and ski bindings at a total cost
PL is the price of unskilled labor in dollars (the wage rate = $6), PC is the price of capital as a percentage, I is family ncome also PS is the price of California oranges.
A decrease in government spending initially and primarily shifts which curve in what direction?
Determine if the firm's mix of inputs is optimal. Explain. If your answer to "b" is no, what should the firm do to improve its performance? Explain.
Assume you are the plant manager for Crossroads Sign Company, which produces road signs in a market that approximates perfect competition. Due to a slow economy, business has been slow and the company is losing money every month.
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