How much capital is in the corporate sector

Reference no: EM131500092

Question: Under the US tax system, capital that is employed in the corporate sector is taxed at a higher rate than capital in the no corporate sector. This problem will analyze the excess burden of the differential taxation of capital. Assume that there are two sectors, corporate and no corporate. The value of marginal product of capital in the corporate sector, VMP_c, is given by VMP_c, = 100 - K_c. where K. is the amount of capital in the corporate sector, and the value of the marginal product of capital in the nonstop rate sector, K_n, is given by VMP_n = 80 - 2 K_n, where K_n is the amount of capital in the no corporate sector. Altogether there are 50 units of capital in society.

a. In the absence of any taxes, how much capital is in the corporate sector and how much in the no corporate sector?

b. Suppose that a unit tax of 6 is levied on capital employed in the corporate sector. After the tax, how much capital is employed in each sector? What is the excess burden of the tax?

Reference no: EM131500092

Questions Cloud

Vendor for the piece of equipment : What is the maximum price would you be willing to offer the vendor for the piece of equipment?

Analyze the impact of the internet onthe business world : Analyze the impact of the Internet and Web applications on the business world. Analyze common Website attacks, weaknesses, and security best practices.

Find the amount of the excess burden : In 2004, Congress voted to subsidize the purchase of capital goods in the manufacturing sector. Nonmanufacturing industries are not eligible for the subsidy.

Improvement in service quality : Assuming that any beds emptied because of the improvement in service quality will be immediately occupied by new patients

How much capital is in the corporate sector : Under the US tax system, capital that is employed in the corporate sector is taxed at a higher rate than capital in the no corporate sector.

What type of technology will be involved in the architecture : Identify what types of technology will be involved in the architecture and explain the purpose of each technology.

Debate about the american economy : Identify a current issue being debated about the American economy.Explain two competing solutions to this problem.Evaluate which one is preferable.

What is the total rate of return on the investment : Compute your total dollar return on this investment. What is the dividend yield? What is the total rate of return on the investment?

Particular stock has a dividend yield : A particular stock has a dividend yield of 1.5 percent. Last year, the stock price fell from $82 to $68. What was the return for the year?

User Account

All Pages