Many states provide firms with an \"investment tax credit\" that effectively red
ID: 1112672 • Letter: M
Question
Many states provide firms with an "investment tax credit" that effectively reduces the price of capital. In theory, these credits are designed to stimulate new investment and thus create jobs. Critics have argued that if there are strong
factor substitution effects,
these subsidies could reduce employment in the state.
Explain their arguments.
A.
Investment tax credits reduce the cost of labor relative to the cost of capital.
B.
Investment tax credits do not affect employment.
C.
Investment tax credits reduce the cost of capital relative to the cost of labor.
D.
Investment tax credits increase the cost of capital relative to the cost of labor.
Goods produced by the economic system that are used as inputs in the production of future goods and services are
A.
consumable goods.
B.
depreciation goods.
C.
tangible goods.
D.
capital goods.
irms that offer to pay for college tuition for their employees are investing in ________ capital.
A.
human
B.
tangible
C.
social
D.
productive
A clothing manufacturer produced 5,000 sweaters, but sold only 4,000 of them.
The remaining 1,000 sweaters would be classified as
A.
part of the firm's tangible capital.
B.
a factor of production.
C.
a loss to the firm.
D.
part of the firm's intangible capital.
The measure of a firm's ________ is the current market value of its plant, equipment, inventories, and intangible assets.
A.
capital flow
B.
investment
C.
depreciation
D.
capital stock
Capital goods yield benefits
A.
in the present only.
B.
before they are put to use.
C.
over their life span.
D.
as soon as the investment decision is made.
he term
investment
as it is used by an economist refers to
A.
the act of buying a share of stock or a bond.
B.
a household's savings.
C.
the net worth of a company's financial assets.
D.
the creation of new capital.
The market in which households supply their savings to firms that demand funds in order to buy capital goods is the ________ market.
A.
savings
B.
money
C.
investment
D.
capital
You are asked to lend a friend $20,000 for a year. At the end of the year your friend agrees to pay you $21,000.
The interest rate on this loan is
A.
4.50%
B.
5.00%.
C.
5.50%.
D.
indeterminate from this information.
You borrow $40,000 at an interest rate of 5% to open Organic Foods, an all-natural food store.
You will earn an economic profit if the return on your investment is
A.
greater than 5%.
B.
10% or greater.
C.
between 0 and 5%.
D.
5%.
Explanation / Answer
Answer :- Many states provide firms with an "investment tax credit" that effectively reduces the price of capital. In theory, these credits are designed to stimulate new investment and thus create jobs. Critics have argued that if there are strong factor substitution effects, these subsidies could reduce employment in the state.
Correct Answer:- Investment tax credits reduce the cost of capital relative to the cost of labor.
Reason:- Investment tax credit reduces the cost of capital and thus provides an impetus for the investment.
Answer:- Goods produced by the economic system that are used as inputs in the production of future goods and services are
Correct Answer:- capital goods.
Reason:- Capital goods are those which are used in production of products for business purpose.
Answer:- Firms that offer to pay for college tuition for their employees are investing in ________ capital.
Correct Answer:- human
Reason:- human capital investment means the firms are paying to the individuals to be more trained and skilled so that they can be employed in future.
Answer:- A clothing manufacturer produced 5,000 sweaters, but sold only 4,000 of them. The remaining 1,000 sweaters would be classified as
Correct Answer:- part of the firms tangible capital.
Reason:- Inventory are treated as the part of tangible capital
Answer:- The measure of a firm's ________ is the current market value of its plant, equipment, inventories, and intangible assets.
Correct Answer:- capital stock
Reason:- Capital stock includes both tangible and intangible assets of the firm.
Answer:- Capital goods yield benefits
Correct Answer:- over their life span.
Reason:- Capital goods provide the various advantages throughout their life span.
Answer:- The term investment as it is used by an economist refers to
Correct Answer:- the creation of new capital.
Reason:- Investment is when there is a creation of new capital assets.
Answer:- The market in which households supply their savings to firms that demand funds in order to buy capital goods is the ________ market.
Correct Answer:- capital
Reason:- Capital market is one where capital goods are bought and sold.
Answer:- You are asked to lend a friend $20,000 for a year. At the end of the year your friend agrees to pay you $21,000. The interest rate on this loan is
Correct Answer:- 5%
Reason:- 1000 = (2000*I*1)/100
I=1000/20 =5%
Answer:- You borrow $40,000 at an interest rate of 5% to open Organic Foods, an all-natural food store.
You will earn an economic profit if the return on your investment is
Correct Answer:- greater than 5%
Reason:- The economic profit is obtained inly when the rate of return is More than the interest rate.
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