Suppose that the government levies a tax on oil companies equal to a proportion of the value
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Suppose that the government levies a tax on oil companies equal to a proportion of the value of the company’s oil reserves. (The government assures the firms that the tax is for one time only.) According to the neoclassical model, what effect will the tax have on business fixed investment by these firms? What if these firms face financing constraints?
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In the neoclassical model the tax on oil reserves would like...View the full answer
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