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The Federal tax code allows businesses but not individuals to deduct the cost of health insurance premiums from their taxable income. Consider a company named HeadBook that could either spend $5000 on an insurance policy for an employee named Vanessa or could increase her annual salary by $5000 instead. a. As far as the tax code is concerned, HeadBook will increase its expenses by $5000 in either case. If it pays for the policy, it incurs a $5000 health care expense. If it raises Vanessa's salary by $5000, it incurs $5000 of salary expense. If HeadBook is profitable and pays corporate profit taxes at a marginal 35 percent rate, by how much will HeadBook's tax liability be reduced in either case? The firm will pay $ less in taxes. b. Suppose that Vanessa pays personal income tax at a marginal 20 percent rate. If HeadBook increases her salary by $5000, how much of that increase will she have after paying taxes on that raise? $ If Vanessa can only devote what remains after paying taxes on the $5000 to purchasing health insurance, how much will she be able to spend on health insurance for herself? $ c. If HeadBook spends the $5000 on a health insurance policy for Vanessa instead of giving it to her as a raise, how many more dollars will HeadBook be able to spend on Vanessa's health insurance than if she had to purchase it herself after being given a $5000 raise and paying taxes on that raise? $ d. Would Vanessa prefer to have the raise or to have HeadBook purchase insurance for her? Vanessa would prefer to have HeadBook purchase insurance for her.Vanessa would prefer to have a raise in her annual salary. Would HeadBook have any profit motive for denying Vanessa her preference? e. Suppose the government changes the tax law so that individuals can now deduct the cost of health insurance from their personal incomes. If Vanessa gets the $5000 raise and then spends all of it on health insurance, will her tax liability change? How much will she be able to spend on health insurance? $ Will she now have a preference for HeadBook to buy insurance on her behalf?
Ajax Cleaning Products is a medium-sized firm operating in an industry dominated by one large firm Tile King. Ajax produces a multi-headed tunnel wall scrubber that is similar to a model produced by Tile King. Ajax decides to charge the same price..
Mirk Labs is a British pharmaceutical company that currently enjoys a patent monopoly in Europe, Canada, and the United States on Zatab (pronounced zay-tab), an allergy medication. The global demand for Zatab is: Qd=15.0-0.2P
where K represents capital equipment and L is labor. Your company owns 4 units of capital equipment and does not have the flexibility needed to acquire additional equipment (that is, capital is fixed at K = 4). Your company is currently employing ..
If you invest $10,000 in this certificate at the beginning of year one and do not add or withdraw any money for five years what is the value of the certificate at the end of the fifth year.
elizabeth M. suburbs makes $200 a week at her summer job and spends her entire weekly income on running shoes and designer jeans, because these are the only two items that provide utility to her.
Suppose the government reduces taxes by $20 billion, that there is no crowding out, and that the marginal propensity to consume is 3/4. 1. What is the initial effect of the tax reduction on aggregate demand
A needy family of a mother and three children currently receives cash benefits that average $12 per day. The mother of this family is allowed to earn an average of $4 per day before her benefits begin to decline.
Although it is impossible to make a pile of money worth exactly $3, it is still possible to buy something that costs $3. You can give two $7 bills to the cashier and receive one $11 bill as change. There are two different ways to make $120.
A small private university is planning to start a volunteer football program. a random sample of alumni is surveyed. it was found that 250 were in favor of this program, 75 were opposed and 25 had no opinion. a. estimate the percent of alumni in fa..
If the unemployment rate stays two percentage points above full employment for an entire year, a. How many jobs will be lost in a labor force of 160 million b. If the average worker produces $100,000 of output, how much output will be lost
Further, the standard deviation for children under 12 was 51.7, while the standard deviation for children 13 to 17 of age was 67.6. Assuming that the variances in the populations are equal, is there a difference in the mean cell phone usage betwee..
Four Seasons Hair Salon is the only women's hair stylist in Lake View. A business consultant has estimated its monthly cost functions as follows: TC = 2000 + 80 Q + 0.05 Q 2 MC = 80 + 0.1 Q The firm is faced with the following demand: Qd = 800 - 4..
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