The Missing Link Chain-Link Fence Company is<\/p>\n
trying to determine how many chain-link fabricating<\/p>\n
machines to buy for its factory. If we define<\/p>\n
a chain-link fence of some specified length to be<\/p>\n
equal to one unit of output, the price of a new fabricating<\/p>\n
machine is 60 units of output, and the price<\/p>\n
of a one-year-old machine is 51 units of output.<\/p>\n
These relative prices are expected to be the same in<\/p>\n
the future. The expected future marginal product of<\/p>\n
fabricating machines, measured in units of output,<\/p>\n
is 165 – 2K, where K is the number of machines in<\/p>\n
use. There are no taxes of any sort. The real interest<\/p>\n
rate is 10% per year.<\/p>\n
a. What is the user cost of capital? Specify the units<\/p>\n
in which your answer is measured.<\/p>\n
b. Determine the number of machines that will allow<\/p>\n
Missing Link to maximize its profit.<\/p>\n
c. Suppose that Missing Link must pay a tax equal<\/p>\n
to 40% of its gross revenue. What is the optimal<\/p>\n
number of machines for the company?<\/p>\n
d. Suppose that in addition to the 40% tax on revenue<\/p>\n
described in Part (c), the firm can take advantage<\/p>\n
of a 20% investment tax credit, which allows it to<\/p>\n
reduce its taxes paid by 20% of the cost of any new<\/p>\n
machines purchased. What is Missing Link\u2019s desired<\/p>\n
capital stock now? (Hint: An investment tax credit<\/p>\n
effectively reduces the price of capital to the firm.)<\/p>\n
need it in 1 hour<\/b><\/p>\n","protected":false},"excerpt":{"rendered":"
The Missing Link Chain-Link Fence Company is trying to determine how many chain-link fabricating machines to buy for its factory. If we define a chain-link fence of some specified length to be equal to one unit of output, the price Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-71899","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/71899","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=71899"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/71899\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=71899"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=71899"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=71899"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}