Question 1
The corporation income tax causes
◦ capital to flow into the corporate sector from the noncorporate sector.
◦ capital to flow from the corporate sector to the noncorporate sector.
◦ less capital to be used in both the corporate sector and the noncorporate sectors.
◦ more capital to be used in both the corporate sector and the noncorporate sectors.
Question 2
Assume that both the corporate and noncorporate sectors are in long-run equilibrium before the imposition of a corporate profits tax. In the short run, the imposition of a corporate profits tax will
◦ decrease profits in both the corporate and noncorporate sectors.
◦ not change profits in either the corporate or the noncorporate sector.
◦ not change profits in the noncorporate sector, but decrease profits in the corporate sector.
◦ not change profits in the corporate sector, but increase profits in the noncorporate sector.
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