Seeing a golden opportunity to raise revenue, the city of Boston levies a per ticket tax of $5 to be paid by the ticket buyer. B
oston sports fans, a famously civic-minded lot, send in the $5 per ticket. True or False: The entire tax burden falls on the team’s owners because supply is perfectly inelastic.
1 answer:
Answer:
TRUE
Explanation:
When supply is perfectly inelastic, the supply curve is vertical as shown in the attached plot. Thus, the tax that shifts the supply curve upward would have no effect on the equilibrium quantity or price paid by consumers. Since equilibrium quantity or price paid by consumer don't change there's no burden on them. However, no team's owners would receive a lower after tax price and thus bearing the entire tax burden.
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Answer:
Current stock price will be $14.50
So option (a) will be correct answer
Explanation:
We have given dividend paid
Growth rate g = 6.5 %
Required return on market = 10.50 %
Risk free return = 4.50 %
So next dividend
We have to find thcompany current stock price
Required rate of return is given by
Required rate of return = Risk Free Return +
= 4.5+1.25×(10.5-4.5) = 12 %
Now current stock price
So option (a) will be correct option