True/False/Uncertain: Consider the model of investment in which each unit of investment costs $1. Now suppose the government offers a tax break of 5 cents per dollar invested. Due to the tax break, the firm now chooses an optimal level of capital K2 resulting in a lower marginal product of capital. Explain your reasoning in words!
True/False/Uncertain: Consider the model of investment in which each unit of investment costs $1. Now suppose the government offers a tax break of 5…
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