Answer: d. Ron has income on the transaction of $21,000
Explanation:
Ron’s stock received for services counts toward the 80% control test so the transfers are eligible for IRC § 351 exemption.
This means that the total income that Ron has as a result of this transaction is the $21,000 for services.
Ron's basis will therefore be;
= Cattle basis + Income from services rendered
= 6,000 + 21,000
= $27,000
Answer:
C) the industry would more closely approximate pure competition
Explanation:
A monopolistically competitive industry is one with different firms selling similar products that are slightly differentiated. It is very easy for firms to enter into industries that are monopolistically competitive. They also have the autonomy to increase their prices.
If the number of firms in a monopolistically competitive industry increases and the degree of product differentiation diminishes they would then resemble a pure competition because they would all be selling identical products which would result in little or no competition.
Answer:
average cost is increasing
Explanation:
Answer: The saving rate is 0.30
Explanation:
The Golden Rule savings rate is referred to as the rate of savings which maximizes steady state level or growth of consumption.
Let k be the capital/labour ratio (i.e., capital per capita), y be the resulting per capita output ( y = f(k) ), and s be the savings rate. The steady state is referred to as a situation in which per capita output is unchanging, which implies that k be constant. This requires that the amount of saved output be exactly what is needed to one quip any additional workers and two replace any worn out capital.
In a steady state, therefore: sf(k)=(n+d)k
Growth rate of output =3%
Depreciation rate= 4%
Capital output ratio is (K/Y)
= 2.5
Begin the steady state condition:
S= ( σ + n + g) (k/Y)
S= (0.03+0.04) (2.5)
S= 0.175
Golden rule steady state
MPK= (0.03+0.04)= 0.07
Capital output ratio=
K/Y= Capital share / MPK
K/Y= 0.3/0.07
K/Y= 4.29
In the golden state, the capital output ratio is equal to 4.29 in comparison to the current capital ratio 2.5.
The saving rate consistent with the steady growth rate
S= ( σ + n + g) (k/Y)
S= (0.03 +0.04) (4.29)
S= 0.30
The saving rate that is consistent with the steady growth rate is 0.30
