Author Question: Business-related expenses of employees are higher than they otherwise would be due to most ... (Read 65 times)

RRMR · **on:** Jul 1, 2018

Business-related expenses of employees are higher than they otherwise would be due to most business-related expenses being _____.

a. frivolous
b. accounted for at personal tax rates, not corporate tax rates
c. a tax credit for the individual
d. nontaxable fringe benefits

Question 2

One million automobiles have a defect that could cause the car to explode; however, only one of those cars will actually explode. Nobody knows which one car it is.

When the car does explode, the victim's family will sue the automaker for 1 million and win. The defect costs 2 per car to repair. What does economics predict about the automaker's decision to repair the defect?

k2629 · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

d

Answer to Question 2

Correcting the defect will cost 2 million. Not correcting the defect will only cost 1 million. Economics predicts that the automaker will not correct the defect.