Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Microeconomics Expert

1. According to estimates by Goolsbee and Petrin (2004), the elasticity of demand for basic cable service is -0.51, and the elasticity of demand for direct broadcast satellites is -7.40. Suppose that a community wants to raise a given amount of revenue by taxing cable service and the use of direct broadcasting satellites. If the community’s goal is to raise the money as efficiently as possible, what should be the ratio of the cable tax to the satellite tax? Discuss briefly the assumptions behind your calculation.

2. Assume the Working Income Tax Benefit tops up a single individual’s income by 25 percent of the amount that employment earnings exceed $3000, up to a maximum payment of $950. Assume the refundable credit is reduced by 15 percent on the amount of earnings in excess of $10,500.

a. Then over what range of earnings is the credit at its maximum value?

b. At what income is the credit reduced to zero?

c. Let statutory income tax be a flat rate of 30 percent, with a basic personal exemption of $10,000. Ignore all other taxes and program benefits in economy. Compute and describe effective marginal tax rate (EMTR) faced by this individual on income ranging from zero to $20,000.

d. Discuss incentive effects associated with this EMTR schedule, concerning the decision to join workforce and to increase hours worked, say, from part-time to full-time.

3. Jack and Jill live alone on an island. Their labour supply schedules are identical and given by L=(1-t)w, where t is income tax rate and w denotes wage. Jill’s wage is 6 and Jack’s is 2. Tax paid by an individual is twL and each receives a transfer equal to half the total revenues. Jack and Jill have identical utility functions given by U = C - (1/2)L2, where C denotes consumption (the individual’s income after tax and transfer). If social welfare function is W = 3Ujack = UJill, what is optimal tax rate? [Hint: prepare W as a function of the tax rate t.] Why is optimal tax rate not 0? Why is it not 1?

4. Nancy is endowed with $1000 of income in period 0 and $315 in period 1. The market interest rate is 5 percent. Her preferences between consumption in future (C1 in period 1) and consumption in present (C0 in period 0) are characterized by utility function  U(C1 ,C0) = C0 C1 , that has the marginal rate of substitution given by MRSC0C1 |ΔC1/ΔC0|= C1/C0

a. In the absence of taxation, how much money does she save or borrow?

b. Now assume the government (that ran on a political campaign slogan of “live in the present”) introduces a tax on interest income equal to 75 percent. Furthermore, any interest payments on borrowed money are not tax deductible. Draw after-tax budget constraint. Label the intercepts and the slope.

c. Determine the after-tax level of saving or borrowing.

d. Identify excess burden and the tax revenue raised on your diagram and determine their corresponding numerical values.

5. Jenna’s boss has decided to pay her a one-time bonus of $5,000. She decides to save money till she retires, 4 years from now. She contemplates two savings options. Option A is to save money for four years outside of an RRSP in a foreign corporate bond that would pay her 10 percent per year. Option B is to save for four years in an RRSP account with the domestic government bond that would pay her 8 percent per year. Marginal income tax rate which Jenna faces while she is working is 30 percent. When she retires her marginal tax rate would drop to 25 percent, since she would be in a lower tax bracket. As her financial advisor, which option do you recommend? (Answer this by computing the net amount of her bonus upon cashing in the investment at her retirement.)

6. ABC corporation is contemplating purchasing a new computer system which will yield a before-tax return of 30 percent. System depreciates at 10 percent a year. The after-tax interest rate is 8 percent, the corporation tax rate is 35 percent, and depreciation allowances follow the straight-line method over five years. There is no investment tax credit. Do you expect ABC to buy new computer system? Describe your answer.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91963

Have any Question? 


Related Questions in Microeconomics

Assignmentbliss v attorney general of canada was a canadian

Assignment Bliss v. Attorney General of Canada was a Canadian Bill of Rights case. Stella Bliss' claim for maternity benefits (under the former Unemployment Insurance Act) as a form of "equality before the law" was rejec ...

Assignment1in your own words please define describe and use

Assignment 1. IN YOUR OWN WORDS, please define, describe and use an example for the following term (see below). The term (including example) should be no more than 50 words.The following rubric is used to assess each ter ...

Need someone to help with the belowthe theory of market

Need someone to help with the below The theory of market economies emphasizes freedom of choice and limited government intervention. The classic argument for government intervention is market failure - the inability of t ...

Assignment economics read the following case study and

ASSIGNMENT: ECONOMICS Read the following case study and answer the given question. THE MACROECONOMICS OF POVERTY REDUCTION: THE CASE STUDY OF BANGLADESH Adapted: Osmani, S.R; Mahmud, W; Sen, B; Dagdeviren, H; and Seth, A ...

New jersey human servicesassignment evaluation of the

NEW JERSEY HUMAN SERVICES Assignment: Evaluation of the Agency's Budgeting and Cumulative Report As a consultant, you need to develop an in-depth analysis and evaluation of the selected agency's budgeting and then provid ...

Economics and quantitative analysis assignmenttopic -

ECONOMICS AND QUANTITATIVE ANALYSIS ASSIGNMENT TOPIC - REGRESSION ANALYSIS Instructions - Background One of the biggest challenges in the higher education sector has been the recent growth of online universities. The Onl ...

Iowa elevatorsresponses will be in a compact format the

Iowa Elevators Responses will be in a compact format. The content of the papers should not exceed three pages in length, excluding the title page, executive summary, or any references. Title Page: Executive Summary: Give ...

Assignmentinstructions the topic of the research paper will

Assignment Instructions: The topic of the research paper will be any disease or condition of the body. The paper must include a thorough description of the disease/condition; current statistics of those affected - epidem ...

Assignmentwhat are the two distinguishing properties of a

Assignment What are the two distinguishing properties of a public good? Explain each in one or two sentences. Give an example of a public good different from any of the examples in your text or my notes. What is the "fre ...

Question 1 a scatter diagram is useful to determine if a

Question 1. A scatter diagram is useful to determine if a relationship exists between two variables. True False Question 2. Consider the following gasoline data: Quarter 1, Year 1, Year 2 1, 150, 156 2, 140, 148 3, 185, ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro