If Corporate Profit Were Defined as the Real Price of Capital

question 37

Multiple Choice

If corporate profit were defined as the real price of capital minus the properly defined cost of capital, then:

• A)having a tax on corporate profits would be more favourable to investment than having no tax at all.
• B)having a tax on corporate profits would be less favourable to investment than having no tax at all.
• C)having a tax on corporate profits would leave investment incentives the same as having no tax at all.
• D)whether a corporate profits tax was more or less favourable for investment than no tax at all would depend on the rate of tax.

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