Suppose Your Company Is in Equilibrium,with Its Capital Stock at Its

question 29

Multiple Choice

Suppose your company is in equilibrium,with its capital stock at its desired level.A permanent increase in the tax rate on your firm's revenues now has what effect on your desired capital stock?

• A)raises it,because the future marginal productivity of capital is higher
• B)lowers it,because the future marginal productivity of capital is lower
• C)raises it,because the after-tax user cost of capital is now lower
• D)lowers it,because the after-tax user cost of capital is now higher

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Definitions:

Limited Resources

Refers to the finite availability of certain resources that people use for production and living.

Economies Of Scale

The cost advantage achieved by increasing production, which typically reduces the average costs per unit through improved efficiency.

High-Quality Products

Goods that meet or exceed customers' expectations in terms of performance, durability, and reliability.

Market Penetration

An assessment of how much a product or service is sold or used, in comparison to the full theoretical scope of the market for it.