Log in
HomeStudy Guides420,000CA160,000

ECO333H1 Final: Tax on Capital and Land

50 views2 pages
emeraldpanda623
20 Sep 2018
School
UTSG
Department
Economics
Course
ECO333H1
Professor
Peter Tomlinson

For unlimited access to Study Guides, a Grade+ subscription is required.

Document Summary

Tax on land, equilibrium level of land and capital inputs does not change. Land rent decreases as there is a tax and people will subsidize land with other input. Tax on land, land cost received by owners are now (ci-g)50/1. 25=40. Tax on land does not reduced capital invested on land, thus it does not reduce the amount of output produce on land. Land supply at x=a is fixed and fully occupied as it is always rented to the highest bidder regardless of the bid rent. Dotted line at 120 is the input availability function, it is tangent to isoquant s=1. Use the two points to find the equation of the function then find l. total land cost+ capital cost+ tax=li: bid rent=ci(land cost including tax)-75 (capital costs)/land used. Bid rent is now lower (to the right of original line) because capital tax causes firm to use more land and less capital.

Get access

Grade+
$40 USD/m
Billed monthly
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
10 Verified Answers

Related textbook solutions

Principles of Economics
2nd Edition, 2017
Openstax
ISBN: 9781947172364
Principles of Macroeconomics
2 Edition,
Openstax
ISBN: 9781947172388
Principles of Microeconomics
2 Edition,
Openstax
ISBN: 9781947172340

Related Documents

ECO333H1 Lecture Notes - Lecture 5: Substitution Model, Hectare, Isocost
bronzejellyfish674
ECO333H1 Lecture Notes - Lecture 2: Isocost, Isoquant, Hectare
beigehound104
ECO333H1 Lecture Notes - Lecture 2: Hectare, Exogeny, Economic Equilibrium
bronzejellyfish674

Related Questions

1. The Houston Chronicle reported that in Houston, the average price of new homes has decreased, while at the same time, the number of new homes sold has increased. This situation could be explained by which one of the following: (draw curves before answering)

  1. An Increase in demand
  2. An Increase in supply
  3. A Decrease in demand
  4. A Decrease in supply

2. In another market, the average price of new homes fell, while at the same time, the number of new homes sold decreased. The situation would best be explained by (Draw the curves before answering)

  1. An Increase in Demand
  2. An Increase in Supply
  3. A Decrease in demand
  4. A Decrease in supply

3. A consumer is said to have achieved maximum total utility when:

  1. Purchases of Good A give the same satisfaction as purchases of Good B.
  2. Purchases of the last dollar spent on Good A give the same satisfaction as purchases of the last dollar spent on Good B.
  3. The average purchases per dollar of Good A give the same satisfaction as the average purchases per dollar of Good B.
  4. The total utility derived from Good A is the same as the marginal utility derived from Good B.

4. You are given the following information about a firm's present output position: MPP (Marginal Physical Product) of Land = 12; MPP of Labor = 16; Price of Land = $2; Price of Labor = $4. With no additional money to spend, this firm should:

5. A firm achieves the least cost in production by substituting factors until

  1. their factor prices are equal
  2. their marginal products are equal to the factor prices
  3. their marginal products are each equal to zero
  4. the ratios of their marginal product equal the ratio of their prices
  5. none of the above

6.The economy is currently on its production possibilities frontier (PPF). A politician says that it is possible to get more of everything--more infrastructure, more schools, more national defense, more spending on social programs, and so on. The politician is

  1. correct if he is assuming a rightward-shifting PPF.
  2. incorrect if he is assuming a rightward-shifting PPF.
  3. correct if he is assuming a PPF that does not change.
  4. none of the above

7. Assume your swimsuit business is at its maximum profit position, and one new change occurs: consumer incomes decrease. If swimsuits are normal goods, the equilibrium price of swimsuits will __________, and the CONSUMER surplus will ________.

  1. increase, increase
  2. decrease, decrease
  3. increase, decrease
  4. decrease, increase

8. Firms that shuts-down in the short-run still must pay:

  1. Marginal cost
  2. Variable cost
  3. Fixed cost
  4. Total cost

9. The term externalities refer to:

  1. Black-market economic activity.
  2. The impact on markets of imported goods.
  3. The costs and benefits of a market activity borne by a third party.
  4. The inequitable distribution of income.

10. If full external costs are not internalized, firms will tend to allocate more of society's scarce resources to produce than is societally warranted, and if full external benefits are not internalized, firms will allocate less of society's resources to produce than is societally justified. True/False.

11. Joe was very careful about smoking in his home until he bought a fire insurance policy. After buying the policy, he became careless. His attitude is: "I'm insured. What do I care if this place burns down; I'll just collect the money". Joe's attitude is an example of ______________.

12. Megatrust Bank had historically scrutinized loans very carefully and extended them, only to persons whom they considered very creditworthy. They made relatively few loans. However, after the government provided guarantees to sub-prime loans, Megatrust relaxed its standards and increased its loan volume. (And its default rate as well.) This is an example of _______________.

13. In the short-run, if a perfectly competitive firm finds itself operating at a loss, it will

  1. Reduce the size of its plant to lower fixed costs.
  2. Raise the price of its product.
  3. Shut down.
  4. Continue to operate as long as it covers its variable cost.

14. If income today is more equally distributed than it was in 1960, a Lorenz Curve depicting today's distribution would be

  1. More bowed and to the left of the 1960's curve.
  2. More bowed and to the right of the 1960's curve.
  3. Less bowed and to the left of the 1960' curve.
  4. Less bowed and to the right of the 1960's curve.

15. Which of the following statements is true?

  1. As output increases, the average fixed cost becomes smaller and smaller.
  2. Average fixed cost does not change as output increases.
  3. The marginal cost curve intersects the average fixed cost curve at its minimum point.
  4. When marginal cost is greater than average fixed cost, average fixed cost increases.
  5.  

16. A firm in any of the market structures we have studied will maximize its profit (or minimizes its loss) when its

  1. Average costs are at a minimum
  2. Marginal revenue and marginal cost are the same.
  3. Marginal revenue is less than marginal cost.
  4. Marginal revenue is zero.

17. If the demand for a good increase, when the price of other good increases, these goods are

  1. Capital goods
  2. Substitute goods
  3. Complementary goods
  4. Luxury goods

18. Which of the following pairs of products are complementary goods?

  1. mobile phones and laptops
  2. pens and pencils
  3. sugar and artificial sweeteners
  4. radios and television
  5. toothbrushes and toothpaste

19. The amount of a good that is given up to produce another good is:

  1. Scarcity
  2. Specialization
  3. Opportunity cost
  4. Trade
  5. Efficiency

20. The most important characteristic of the equilibrium price is that it:

  1. Guarantees that producers earn a profit.
  2. Increases the quantity demanded.
  3. Clears the market.
  4. Decreases the quantity supplied.

21. Rank the following market structures based on the number of participating firms: From the fewest number of firms to the most number of firms:

  1. Oligopoly
  2. Perfect Competition
  3. Monopoly
  4. Monopolistic Competition

22. If firms in a monopolistically competitive market are earning economic profits which of the following scenarios would best reflect the change facing incumbent firms as the market adjusts to its new equilibrium?

  1. an increase in demand
  2. a decrease in demand
  3. a downward shift in their marginal cost curve
  4. an upward shift in their marginal cost curve


23. If labor in Mexico is less productive than labor in the United States in all areas of production, 

  1. neither nation can benefit from trade
  2. Mexico can benefit from trade but the United States cannot
  3. Mexico will not have a comparative advantage in any good
  4. both nations can benefit from trade

24. Which of the following statements is false?

  1. The typical monopolistically competitive firm could reduce its average total cost if it produced more output.
  2. Monopolistically competitive firms advertise to increase the elasticity of the demand curve they face.
  3. Expensive advertising might help consumers if it is a signal that the product is good.
  4. Brand names acquired at great cost might help consumers by assuring quality.

25. Suppose the state of Wyoming passes a law that increases the tax on cigarettes. As a result, smokers who live in Wyoming start purchasing their cigs in surrounding states. Which of the following principles does this best illustrate:

  1. people respond to incentives
  2. rational people think at the margin
  3. a trademark can make everyone better off
  4. markets are usually a good way to organize economic activity

MULTIPLE CHOICE.

1) Which of the following is true of the typical relationship between marginal product (MP) and average product (AP)?

A) The AP curve intersects the MP curve at minimum MP.

B) If MP is less than AP, then AP is increasing.

C) If MP is greater than AP, then AP is falling.

D) The MP curve intersects the AP curve at maximum AP.

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

2) If, for a particular short-run production, we observe that marginal product is decreasing we can conclude that average product is decreasing as well.

MULTIPLE CHOICE.

3) An implicit cost is defined as:

A) the amount by which the money spent on an input to production exceeds its opportunity cost.

B) the difference between an input's explicit cost and its actual cost.

C) the opportunity cost of using a resource that is not explicitly paid out by the firm.

D) the amount by which economic profit exceeds accounting profit.

MULTIPLE CHOICE.

4) The amount of output a firm can produce with a given quantity of fixed and variable inputs is called:

A) total fixed product.

B) average variable product.

C) marginal product.

D) total product.

5) Which of the following statements is true of the relationship among the average cost functions?

A) AFC = ATC + AVC

B) ATC = AFC - AVC
C) AVC = AFC + ATC

D) AFC = ATC - AVC

 

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

6) A firm's production function is the relationship between the factors of production and the resulting outputs of the production process.

MULTIPLE CHOICE.

Scenario 2:
Output (Q): 0 1 2 3 4 5 6

Total Cost (TC): $24 $33 $41 $48 $54 $61 $69

7) Refer to Scenario 2. Diminishing marginal returns starts to occur between units:

A) 2 and 3.

B) 3 and 4.

C) 4 and 5.

D) 5 and 6.

8) Which of the following would be classified as a short-run decision?

A) trucking firm's decision to move to a smaller facility.

B) A firm's decision to decrease the amount of electricity used in day-to-day operations by encouraging employees to adopt conservation strategies, e.g., shut off lights when leaving a room.

C) A university's decision to add a new residence hall.

D) A restaurant's decision to increase the number of patrons it can accommodate by adding on a new dining room.

9) Economic profit is equal to the difference between: 9)

1.

2.

3.

4.

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

10) At the point where a firm incurs diminishing marginal returns, total product will begin to decline.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

11) In the context of a production function, the remote order takers in the fast food industry would be classified as:

A) a fixed input.

B) a marginal input.

C) an inframarginal input.

D) a variable input.

Scenario 3:
Total Product (Q): 0 1 2 3 4 5 6

Total Cost (TC): $50 $80 $105 $125 $155 $195 $250

12.

13.

increase; lower

decrease; lower

increase; higher

decrease; higher

 

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

14.

15.

 

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

16) A labor-intensive method of production is one that:
A) combines a small but sophisticated labor force with a large amount of capital.

B) requires employees to work harder than they would in other occupations.
C) relies on large quantities of labor and smaller quantities of capital equipment. D) relies exclusively on labor.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

17) Assume a firm produces 500 units of a good by using two inputs, capital and labor, whose per unit prices are $10 and $4. Assume also that the marginal physical product of the last unit of capital is 30 and the marginal physical product of the last unit of labor is 10. To minimize costs this firm should employ:

A) more labor and less capital. B) more capital and less labor.
C) the existing combination of resources. D) both more labor and more capital.

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

18) All else constant, a decrease in the per unit price of labor would create an incentive for a firm manager to substitute labor for capital in the firm's production process.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

19) All else constant, as the price of petroleum increases relative to the prices of other inputs to the production process, in their effort to minimize their total costs of production, we can expect to see firms employ:

A) the same amount of petroleum since there are no substitutes for petroleum. B) less petroleum and more of the other inputs to production.
C) less of each of the inputs of production.

D) more petroleum and less of the other inputs to production.

home / study / business / economics / economics questions and answers / suppose that a given district has two massive aluminium smelters, smelter 1 and smelter 2, ...

Question: Suppose that a given district has two massive aluminium smelters, smelter 1 and smelter 2, that t...

Suppose that a given district has two massive aluminium smelters, smelter 1 and smelter 2, that transform “alumina” (extracted from bauxite) into aluminium. So the smelters use alumina as an input, but its use leads to emissions of aluminium flourides (F) as particulates into the air, creating health problems for some residents in the district’s nearby city.

Suppose next that the district government cannot reliably observe the individual F emissions of the two smelters, only the overall FTotal. However, the government can reliably track the individual smelter’s use of the alumina input, A1 and A2, in metric tonnes.

a. Suppose aggregate MAC =600000 – 1000FTotal, and MAB = 500 FTotal.

Please identify the socially optimal level of FTotal. Show your work.

Ftotal=400

b. If the two smelters just look to their own profits, what will FTotal be?

MAC=0 600,000-1000Ftotal=0 Ftotal=600

c. Suppose that government scientists have a good estimate of the relationship between alumina use and total F air pollution: FTotal = .001(A1 + A2)

What must the combined level of alumina inputs (A1 + A2) be capped at to achieve the socially optimal FTotal from part (a)?

400=0.001(A1+A2) A1+A2=400,000

d. We can express the two smelters’ aggregate MAC over F as their aggregate MAC over the use of A. If MAC = 600000 – 1000FTotal = 600000 – 1000*.001(A1 + A2) = 600000-1(A1 + A2)=600000-ATotal.

At what tax per metric tonne of A would the two smelters cut back to a combined purchase of the socially optimal level of ATotal*?

?????

e) Suppose that smelter 1’s newer production techniques are such that it doesn’t need nearly as much alumina as smelter 2 to be viable, but finds it far more costly to reduce its use of the input:

MAC1 = 600000 – 6A1

MAC2 = 600000 – 1.2 A2

How would the two smelters respond to a tax of $200,000 per tonne of A?

?????

f) what is the A reduction cost borne by the two smelters individually as a result of the tax, and thus the total reduction cost?

?????

g) Next suppose that the district government thinks a tax on purchases of A is too complicated to administer, or unpopular with the smelters. Instead, it just says that “neither smelter may use more than 200,000 tonnes of alumina.”

What would the resulting total level of A use be from the two smelters, given their particular MAC curves? What would the total A reduction cost be of this policy?

??????

2a. FTotal* = _________________.

2b. If both firms pay nothing for emissions, then when maximising profit FTotal = ______________.

2c. To achieve the FTotal* found in 2a), ATotal* = _________________.

2d. The two smelters would cut back to ATotal* at a tax of $ per tonne.

2e. At the tax found in 2d), Smelter 1 would choose A1* = ___________ tonnes of alumina.

At the tax found in 2d), Smelter 2 would choose A2* = ___________ tonnes of alumina.

2f. The cost of reducing A1 use to Smelter 1 under this tax is $ ______ . (This does not

include the tax paid by Smelter 1 to the government for the A it continues to use.)

The cost of reducing A2 use to Smelter 2 under this tax is $ . (This does not

include the tax paid by Smelter 2 to the government for the A it continues to use.)

So the total A reduction cost from the tax is $ ____ .

2g. With the uniform rule of a 200,000 cap in A use, Smelter 1 would use A1 = ___________.

Smelter 2 would use A2 = ______________. So the total A use would be ______________.

The cost of reducing A1 use to Smelter 1 under this rule is $______________.

The cost of reducing A2 use to Smelter 2 under this rule is $______________.

So the total A reduction cost from this rule is $________________.