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

Microeconomicsdiscussion forumnote the video has closed

Microeconomics DISCUSSION Forum Note: The video has Closed Captioning. To activate it, start the video, mouse over the bottom of the video and click on the CC icon, then select from the menu. Note: The video has Closed C ...

Assignmentin this assignment you must break a norm this

Assignment In this assignment, you must break a norm. This breach must be done in a public forum. You will be writing an essay about your experiment, in which you must be sure to answer all of the questions listed in thi ...

Short answer amp essay questionsyou must complete two short

Short Answer & Essay Questions You must complete two Short answer questions and one Essay question All answers must be in the form of a paragraph (minimum of 5 sentences per paragraph). Please select from below: Short An ...

Question 1which of the following has not been identified as

Question 1 Which of the following has NOT been identified as a basic consumer right? Consumers have a right to safe products. Consumers have a right to collude. Consumers have a right to be informed about a product. Cons ...

Milestone projectmilestone one propose organization for

Milestone Project Milestone One: Propose Organization for Analysis In Module Three, you will select the organization you would like to analyze in part two of the final project using the U.S. Securities and Exchange Commi ...

Scenario descriptionbigjet plans to launch a weekly flight

Scenario Description Bigjet plans to launch a weekly flight on a long-haul route. It faces four sets of decisions corresponding to short-run, medium-run, long-run, and very long-run operations. Short Run: In the short ru ...

Implicit and explicit costs economic problemsproblem achoco

Implicit and Explicit Costs: Economic Problems Problem A Choco Delite is a manufacturer of fine chocolates. Its monthly rental expense is $1,000,000. It also has $2 million in fixed labor costs. Its marginal costs are $. ...

Assignmentvisit wwwlovemarkscom and share your thoughts on

Assignment Visit www.lovemarks.com and share your thoughts on Branding and Pricing as it relates.....to "The Future Beyond Brands." Check out the Love/Respect Axis and see just where your favorite brand is sitting. (lmnu ...

Suppose the economy was at equilibrium before the start of

Suppose the economy was at equilibrium before the start of the recession. Show this using the IS-LM, Keynesian cross, AD-SRAS-LRAS and money market spaces. Following the start of the recession, what happened to aggregate ...

Meqa assignment 2its been three weeks since you started

MEQA Assignment 2 It's been three weeks since you started working for BioMed and there's still no trace of Selwyn. That means you're still BioMed's resident economic expert. Harry the CEO was pleased with your earlier wo ...

  • 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

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

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen