Learning Materials
Features
Discover
Chapter 21: Q.19 (page 484)
Take a look at Figure 21-1. Suppose that Q = 10 acres and P = $2000 per acre. What is the dollar amount of economic rents received during the current period, and why is this amount classified as economic rents?
the dollar amount of economic rents is
Over 30 million students worldwide already upgrade their learning with 91影视!
All the tools & learning materials you need for study success - in one app.
Get started for free
If administrators of government pension funds for public employees were to discover in a future yes that they had used a discount rate that was too high, who would end up having to ensure payment of promised pensions?
Suppose that one of your classmates informs you that he has developed a method of forecasting stock market returns based on past trends. With a monetary investment from you, he claims that the two of you could profit handsomely from this forecasting method. How should you respond to your classmate?
Take a look at Figure 21-2. Explain why the figure implies that if the amount of accounting profit were to shrink to zero while the normal rate of return on investment remained unchanged, economic profit necessarily would become negative.
The owner of WebCity is trying to decide whether to remain a proprietorship or to incorporate. Suppose that the corporate tax rate on profits is percent and the personal income tax rate is localid="1653216490078" percent. For simplicity, assume that all corporate profits (after corporate taxes are paid) are distributed as dividends in the year they are earned and that such dividends are subject to tax at the personal income tax rate.
a. If the owner of WebCity expects to earn localid="1653216495193" in before-tax profits this year, regardless of whether the firm is a proprietorship or a corporation, which method of organization should be chosen?
b. What is the dollar value of the after-tax advantage of the form of organization determined in part (a)?
c. Suppose that the corporate form of organization has cost advantages that will raise beforetax profits by localid="1653216505277" . Should the owner of WebCity incorporate?
d. Based on parts (a) and (c), by how much will after-tax profits change due to incorporation?
e. Suppose that tax policy is changed to completely exempt from personal taxation the first localid="1653216517393" per year in dividends. Would this change in policy affect the decision made in part (a)?
f. How can you explain the fact that even though corporate profits are subject to double taxation, most business in the United States is conducted by corporations rather than by proprietorships or partnerships?
Understand the concept of economic rent.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
Explanations 
Textbooks 
Flashcards 
91影视 AI 
Notes 
Study Plans 
Study Sets 
Find a degree 
Magazine