Question
1. Implicit costs are defined by economists as nonmonetary opportunity costs. Why is it important for a firm to take these costs into consideration when
1. Implicit costs are defined by economists as nonmonetary opportunity costs. Why is it important for a firm to take these costs into consideration when evaluating a potential activity when they don't involve any monetary expense?
2. Consider the following two taxes: 1) a state imposes a 10-cent tax on every gallon of gasoline sold in the state to pay for road maintenance and improvements, and 2) a state imposes an additional 1% income tax on all state residents to pay for the construction of 50 new soccer fields throughout the state. Which of these two taxes is more consistent with the benefits-received principle? Why?
3. There are over 30 million firms in the U.S., of which about 5.8 million are corporations. A mere 35,000 of these corporations have annual sales of over $50 million, and this relative handful of corporations commonly thought of as "big business", account for over 80% of total corporate profits in this country. Are those millions of other corporations, sole proprietorships, and partnerships outside of big business fairly insignificant to the U.S. economy then? If not, then what is the importance of these smaller companies to the national economy?
4. Any company in the U.S. that plans to issue stocks or bonds is required by the Securities and Exchange Commission to provide its balance sheet and income statement to the public. Why is this requirement in place? What kind of information that would be useful to potential investors can be found in these financial statements?
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