Firm A's Isoprofit Curves Are Flatter Than Those of Firm

question 38

Multiple Choice

Firm A's isoprofit curves are flatter than those of firm B.Therefore,

• A) firm A will be willing to pay a larger compensating differential than firm B.
• B) firm B will be willing to pay a larger compensating differential than firm A.
• C) both firms will pay the same compensating differential, but firm B will have higher profits than firm A.
• D) risk is more costly to reduce in firm A than in firm B.

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Definitions:

Payroll Tax Expense

Tax that a business must pay based on the wages and salaries of its employees, including social security, Medicare, and unemployment taxes.

FICA

The Federal Insurance Contributions Act, which funds Social Security and Medicare, requiring employers and employees to pay a percentage of earnings.

Look-Back Period

A period of time used to determine whether a business should make its Form 941 tax deposits on a monthly or semiweekly basis. The IRS defines this period as July 1 through June 30 of the year prior to the year in which Form 941 tax deposits will be made.

Form 941

A tax form used by employers to report federal withholdings from employee wages, including Social Security and Medicare taxes.