Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider a country with only two industries--Industry A and Industry B Capital can be employed in either industry, and the value of the marginal product

image text in transcribed
Consider a country with only two industries--Industry A and Industry B Capital can be employed in either industry, and the value of the marginal product of capital differs in the two industries. Initially, there is no tax on the use of capital. The value of the marginal product of capital in Industry A is given by VMPA-600-SKA, where KA is the quantity of capital employed in Industry A. The value of the marginal product of capital in Industry B is given by VMP3=300-2KB, where KB is the quantity of capital employed in Industry B. There is a total of 130 units of capital available in the country Part 1) If there is no tax on capital in either industry, what will be the quantity of capital employed in Industry B? [NOTE: If necessary, please round to the nearest whole number] units of capital in Industry B Part 2) Now suppose the government decides to impose a $10 per unit on capital used in Industry B only What is the equation for the value of the marginal product of capital in Industry B that incorporates this per unit tax? [Fill in the blanks with whole numbers to complete the equation below VMPB(tax) " Part 3) This tax results in an excess burden because Othere are losses in Industry A with no offsetting gains in Industry B Othere are losses in Industry B with no offsetting gains in Industry A the losses in Industry A exceed the gains in Industry B the losses in Industry B exceed the gains in Industry A there are losses in Industry A and in Industry B

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting

Authors: Ray Garrison, Eric Noreen, Peter Brewer

11th Edition

0072834943, 9780072834949

More Books

Students also viewed these Accounting questions

Question

What are the HR forecasting techniques?

Answered: 1 week ago

Question

Define succession planning. Why is it important?

Answered: 1 week ago

Question

Distinguish between forecasting HR requirements and availability.

Answered: 1 week ago