Refer to Scenario 10.2. Suppose that in addition to the tax, a business license is required to stay in business. The license costs $1000. What happens to profit?
A) It increases by $1000.
B) It decreases by $1000.
C) It decreases by less than $1000.
D) It stays the same.
B
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There are several reasons why interest rate parity may not hold exactly and, therefore, we can earn arbitrage profits from this situation
Indicate whether the statement is true or false
All of the following are tax shields except which one?
A) depreciation allowances B) an interest-only payment of a loan C) a principal payment on a loan D) straight-line depreciation
A carbon tax is an example of:
A. a Coase theorem solution. B. a Pigovian tax. C. a market failure. D. a Coase tax.
Each of the following people would be hurt by unanticipated inflation except
A. long-term bondholders. B. debtors. C. landlords who have granted long-term leases. D. retired people on fixed pensions.