Suppose a Foreign Subsidiary Earns $2 Million After Paying Foreign

question 20

Multiple Choice

Suppose a foreign subsidiary earns $2 million after paying foreign income taxes of $500,000.If the subsidiary retains all of its earnings,what is the amount of the indirect foreign tax credit that its parent will receive?

• A)$500,000
• B)$250,000
• C)$400,000
• D)it receives no foreign tax credit

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Definitions:

Market Economy

An economic system in which economic decisions and the pricing of goods and services are guided solely by the aggregate interactions of a country's citizens and businesses.

Pollution

The introduction of contaminants into the natural environment that cause adverse change.

Socially Optimal Quantity

The level of production that maximizes societal welfare, often considered at the point where marginal cost equals marginal benefit.

Marginal Social Cost

The total cost to society of producing one additional unit, including both private costs and any external costs.