Chapter 21: Q.20 (page 484)
Reconsider Figure 21-1 and the data provided in Problem 21-19, and suppose that per acre. By how much do economic rents change when the rental rate on land rises from in the figure?
The economic rents change by
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
After graduation, you face a choice. One option is to work for a multinational consulting firm and earn a starting salary (benefits included) of . The other option is to usein savings to start your own consulting firm. You could earn an interest return of 5 percent on your savings. You choose to start your own consulting firm. At the end of the first year, you add up all of your expenses and revenues. Your total includes in rent, in office supplies, for office staff, and in telecommunications expenses. What are your total explicit costs and total implicit costs?
The owner of WebCity is trying to decide whether to remain a proprietorship or to incorporate. Suppose that the corporate tax rate on profits is percent and the personal income tax rate is localid="1653216490078" percent. For simplicity, assume that all corporate profits (after corporate taxes are paid) are distributed as dividends in the year they are earned and that such dividends are subject to tax at the personal income tax rate.
a. If the owner of WebCity expects to earn localid="1653216495193" in before-tax profits this year, regardless of whether the firm is a proprietorship or a corporation, which method of organization should be chosen?
b. What is the dollar value of the after-tax advantage of the form of organization determined in part (a)?
c. Suppose that the corporate form of organization has cost advantages that will raise beforetax profits by localid="1653216505277" . Should the owner of WebCity incorporate?
d. Based on parts (a) and (c), by how much will after-tax profits change due to incorporation?
e. Suppose that tax policy is changed to completely exempt from personal taxation the first localid="1653216517393" per year in dividends. Would this change in policy affect the decision made in part (a)?
f. How can you explain the fact that even though corporate profits are subject to double taxation, most business in the United States is conducted by corporations rather than by proprietorships or partnerships?
What likely caused average stock prices to decline even after China's government's efforts to boost the demand for shares of stock? (Hint: Many private individuals and companies continued to seek to sell large amounts of shares of stock.)
How do you suppose that proponents of the random walk theory for prices of individual shares of stock would respond to the view that the average of stock prices might be predictable? Explain your reasoning.
Distinguish among the main organizational forms of business and explain the difference between accounting profits and economic profits
What do you think about this solution?
We value your feedback to improve our textbook solutions.
