Question 1

A return that exceeds a firm's payouts to its factors of production is a(n):

Accepted Answer

A)  dividend. 
B)  capital gain. 
C)  pure profit. 
D)  accounting profit. 
A)  dividend. 
B)  capital gain. 
C)  pure profit. 
D)  accounting profit.

Question 2

If corporations bear at least some of the tax burden when profits are taxed,this means that workers are likely to bear some of the burden through:

Accepted Answer

A)  higher wages if labor supply is not perfectly elastic. 
B)  higher wages if labor supply is perfectly elastic. 
C)  lower wages if labor supply is not perfectly elastic. 
D)  lower wages if labor supply is perfectly elastic. 
A)  higher wages if labor supply is not perfectly elastic. 
B)  higher wages if labor supply is perfectly elastic. 
C)  lower wages if labor supply is not perfectly elastic. 
D)  lower wages if labor supply is perfectly elastic.

Question 3

_________ are people who have purchased ownership stakes in a company,and _________ are a group of people who meet periodically to review decisions made by a firm's management and report to the broader set of owners on management's performance.

Accepted Answer

A)  Corporate executives; shareholders 
B)  Shareholders; corporate executives 
C)  Corporate executives; the board of directors 
D)  Shareholders; the board of directors 
A)  Corporate executives; shareholders 
B)  Shareholders; corporate executives 
C)  Corporate executives; the board of directors 
D)  Shareholders; the board of directors

Question 4

Suppose there is a corporate tax on cash earnings minus labor costs.As a result:

Accepted Answer

A)  the return per dollar of investment per period is smaller for a given level of investment than it would be without the tax. 
B)  the marginal cost of investment is higher than it would be without the tax. 
C)  firms invest more than they would without the tax. 
D)  the return per dollar of investment per period is larger for a given level of investment than it would be without the tax. 
A)  the return per dollar of investment per period is smaller for a given level of investment than it would be without the tax. 
B)  the marginal cost of investment is higher than it would be without the tax. 
C)  firms invest more than they would without the tax. 
D)  the return per dollar of investment per period is larger for a given level of investment than it would be without the tax.

Question 5

Which of the following groups is unlikely to bear the burden of a corporate tax in the long run?

Accepted Answer

A)  consumers 
B)  capital owners 
C)  domestic workers 
D)  foreign workers 
A)  consumers 
B)  capital owners 
C)  domestic workers 
D)  foreign workers

Question 6

Which term refers to the increase in the price of a share since its purchase?

Accepted Answer

A)  dividend 
B)  capital gain 
C)  pure profit 
D)  economic profit 
A)  dividend 
B)  capital gain 
C)  pure profit 
D)  economic profit

Question 7

U.S.firms are taxed on profits earned in other countries:

Accepted Answer

A)  during the tax year when the profits are earned. 
B)  only when the foreign country collects no tax. 
C)  when the income is repatriated from the foreign subsidiary to the U.S.parent company. 
D)  at much higher rates than they are taxed on profits earned domestically. 
A)  during the tax year when the profits are earned. 
B)  only when the foreign country collects no tax. 
C)  when the income is repatriated from the foreign subsidiary to the U.S.parent company. 
D)  at much higher rates than they are taxed on profits earned domestically.

Question 8

Which statement about the benefits of an investment is generally assumed to be TRUE in economic models?

Accepted Answer

A)  The marginal product of capital is increasing. 
B)  The marginal product of capital is constant. 
C)  The marginal product of capital is diminishing. 
D)  The marginal product of capital is equal to the marginal product of labor. 
A)  The marginal product of capital is increasing. 
B)  The marginal product of capital is constant. 
C)  The marginal product of capital is diminishing. 
D)  The marginal product of capital is equal to the marginal product of labor.

Question 9

Why do governments levy corporate taxes on firms rather than taxing the factors of production that make up those firms? Discuss the two fundamental reasons.

Accepted Answer

There are at least two reasons: First,th

Question 10

In a world without taxes,suppose that a firm finances an investment through selling equity shares on which it has to pay a dividend per dollar of investment equal to d.The total cost of a $1 investment each period is:

Accepted Answer

A)  the rate of depreciation. 
B)  d. 
C)  the rate of depreciation plus d. 
D)  d minus the rate of depreciation. 
A)  the rate of depreciation. 
B)  d. 
C)  the rate of depreciation plus d. 
D)  d minus the rate of depreciation.

Question 11

Which term refers to the difference between a firm's revenues and its reported costs of production?

Accepted Answer

A)  dividend 
B)  pure profit 
C)  economic profit 
D)  accounting profit 
A)  dividend 
B)  pure profit 
C)  economic profit 
D)  accounting profit

Question 12

Which statement describes the major advantage of incorporation?

Accepted Answer

A)  Incorporation solves the agency problem. 
B)  Income tax rates are significantly lower. 
C)  The owners of the firm cannot be held personally responsible for the obligations of the firm. 
D)  Expenses can be deducted from income. 
A)  Incorporation solves the agency problem. 
B)  Income tax rates are significantly lower. 
C)  The owners of the firm cannot be held personally responsible for the obligations of the firm. 
D)  Expenses can be deducted from income.

Question 13

Firms pay taxes on __________.An optimal tax on corporate profit would be levied on _________.

Accepted Answer

A)  economic profits; dividends 
B)  economic profits; accounting profits 
C)  capital gains; economic profits 
D)  accounting profits; economic profits 
A)  economic profits; dividends 
B)  economic profits; accounting profits 
C)  capital gains; economic profits 
D)  accounting profits; economic profits

Question 14

If a firm finances investment by selling equity,which statement is TRUE?

Accepted Answer

A)  The firm faces a greater risk of bankruptcy since stockholders must be paid no matter what. 
B)  The firm pays no corporate tax on income distributed to investors through dividends. 
C)  The firm has a choice of paying dividends or retaining earnings for reinvestment. 
D)  There are no significant differences between equity financing and debt financing. 
A)  The firm faces a greater risk of bankruptcy since stockholders must be paid no matter what. 
B)  The firm pays no corporate tax on income distributed to investors through dividends. 
C)  The firm has a choice of paying dividends or retaining earnings for reinvestment. 
D)  There are no significant differences between equity financing and debt financing.

Question 15

The vast majority of large corporations face which tax rate?

Accepted Answer

A)  5% 
B)  10% 
C)  25% 
D)  35% 
A)  5% 
B)  10% 
C)  25% 
D)  35%

Question 16

If a firm finances investment by selling bonds,then the:

Accepted Answer

A)  bondholders pay dividend tax on the interest they later receive. 
B)  bondholders pay personal income tax on the interest they later receive. 
C)  firm pays corporate tax on the amount they repay to the bondholders. 
D)  firm pays corporate tax on the amount they borrow from bondholders. 
A)  bondholders pay dividend tax on the interest they later receive. 
B)  bondholders pay personal income tax on the interest they later receive. 
C)  firm pays corporate tax on the amount they repay to the bondholders. 
D)  firm pays corporate tax on the amount they borrow from bondholders.

Question 17

Corporate taxes can be calculated based on:

Accepted Answer

A)  Taxes = ([Revenues - Expenses] × tax rate)- Tax Credits 
B)  Taxes = ([Revenues - Expenses] × [1 - tax rate])- Tax Credits 
C)  Taxes = ([Revenues - Expenses] × [1 - tax rate])+ Tax Credits 
D)  Taxes = ([Revenues - Expenses] × tax rate)+ Tax Credits 
A)  Taxes = ([Revenues - Expenses] × tax rate)- Tax Credits 
B)  Taxes = ([Revenues - Expenses] × [1 - tax rate])- Tax Credits 
C)  Taxes = ([Revenues - Expenses] × [1 - tax rate])+ Tax Credits 
D)  Taxes = ([Revenues - Expenses] × tax rate)+ Tax Credits

Question 18

Under current tax law,U.S.corporations are:

Accepted Answer

A)  not permitted to claim tax payments to foreign governments as a credit against U.S.taxes. 
B)  permitted to claim tax payments to foreign governments as a credit against U.S.taxes. 
C)  exempt from the corporate income tax if they have production facilities located abroad. 
D)  required to pay both foreign taxes and U.S.taxes with no credits. 
A)  not permitted to claim tax payments to foreign governments as a credit against U.S.taxes. 
B)  permitted to claim tax payments to foreign governments as a credit against U.S.taxes. 
C)  exempt from the corporate income tax if they have production facilities located abroad. 
D)  required to pay both foreign taxes and U.S.taxes with no credits.

Question 19

A straight-line depreciation schedule allows an asset to be deducted from earnings more _______ than an accelerated depreciation schedule,and more _________ than expensing the investment.

Accepted Answer

A)  quickly; quickly 
B)  quickly; slowly 
C)  slowly; slowly 
D)  slowly; quickly 
A)  quickly; quickly 
B)  quickly; slowly 
C)  slowly; slowly 
D)  slowly; quickly

Question 20

How are tax payments made by U.S.-based corporations to foreign governments treated under U.S.corporate tax policy? Is there a tax advantage to corporations in earning income in other nations? Explain.

Accepted Answer

U.S.-based multinational corporations ca

Exam 24: Taxation of Business Income

A return that exceeds a firm's payouts to its factors of production is a(n):

If corporations bear at least some of the tax burden when profits are taxed,this means that workers are likely to bear some of the burden through:

_________ are people who have purchased ownership stakes in a company,and _________ are a group of people who meet periodically to review decisions made by a firm's management and report to the broader set of owners on management's performance.

Suppose there is a corporate tax on cash earnings minus labor costs.As a result:

Which of the following groups is unlikely to bear the burden of a corporate tax in the long run?

Which term refers to the increase in the price of a share since its purchase?

U.S.firms are taxed on profits earned in other countries:

Which statement about the benefits of an investment is generally assumed to be TRUE in economic models?

Why do governments levy corporate taxes on firms rather than taxing the factors of production that make up those firms? Discuss the two fundamental reasons.

In a world without taxes,suppose that a firm finances an investment through selling equity shares on which it has to pay a dividend per dollar of investment equal to d.The total cost of a $1 investment each period is:

Which term refers to the difference between a firm's revenues and its reported costs of production?

Which statement describes the major advantage of incorporation?

Firms pay taxes on __________.An optimal tax on corporate profit would be levied on _________.

If a firm finances investment by selling equity,which statement is TRUE?

The vast majority of large corporations face which tax rate?

If a firm finances investment by selling bonds,then the:

Corporate taxes can be calculated based on:

Under current tax law,U.S.corporations are:

A straight-line depreciation schedule allows an asset to be deducted from earnings more _______ than an accelerated depreciation schedule,and more _________ than expensing the investment.

How are tax payments made by U.S.-based corporations to foreign governments treated under U.S.corporate tax policy? Is there a tax advantage to corporations in earning income in other nations? Explain.

Why Study Public Finance

Theoretical Tools of Public Finance

Empirical Tools of Public Finance

Budget Analysis and Deficit Financing

Externalities- Problems and Solutions

Externalities in Action- Environmental and Health Externalities

Public Goods

Cost-Benefit Analysis

Political Economy

State and Local Government Expenditures

Education

Social Insurance- the New Function of Government

Social Security

Unemployment Insurance, disability Insurance, and Workers Compensation

Health Insurance I- Health Economics and Private Health Insurance

Health Insurance Ii- Medicare, medicaid, and Health Care Reform

Income Distribution and Welfare Programs

Taxation- How It Works and What It Means

The Equity Implications of Taxation- Tax Incidence

Taxes on Labor Supply

Taxes on Savings

Taxes on Risk Taking and Wealth

Fundamental Tax Reform and Consumption Tax

Filters

_ are people who have purchased ownership stakes in a company,and _ are a group of people who meet periodically to review decisions made by a firm's management and report to the broader set of owners on management's performance.

Firms pay taxes on __.An optimal tax on corporate profit would be levied on _.

A straight-line depreciation schedule allows an asset to be deducted from earnings more _ than an accelerated depreciation schedule,and more ___ than expensing the investment.