STAYER ECO 450 Week 10 Quiz 8 Ch 15 and 16
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1. The corporate income tax in the United States is levied only on economic profits.
2. Imputed interest from retained earnings are not deducted when computing taxable corporate income.
3. In general, the shorter the depreciation period allowed for tax purposes, the higher the tax burden on corporations.
4. Accelerated depreciation allows a firm to deduct more than the actual economic depreciation from its income each year.
5. Inflation causes an understatement of true depreciation cost.
6. If a corporation maximizes profits, an ad valorem tax on its profits will result in a reduction in output in the short run.
7. Assuming that the corporate income tax is not shifted to consumers in the short run, the long-run effect will be a reduction in the return to investment in both the corporate and noncorporate sector.
8. The excess burden of the corporate income tax stems from a misallocation of investment between the corporate and noncorporate sectors when the supply of savings is perfectly inelastic.
9. When the supply of savings is not perfectly inelastic, the corporate income tax can be shifted to workers.
10. In the long run the corporate income tax has no effect on the price of products produced by corporations.
11. The corporate income tax in the United States is levied on the sum of economic and normal profits.
12. The corporate income tax is levied only on retained earnings with dividends paid out exempt from taxation.
13. Because the corporate income tax base includes dividends, those dividends are taxed twice if they are also included in the personal income tax base.
14. Because the opportunity cost of a corporate equity is not tax deductible, the corporate income tax encourages borrowing, which allows...