Managerial Economics Research Assignment Papaer (Coursework Sample)

Managerial economics
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Managerial economics
Question one
Tax credit is a description of a possible reduction in a firm’s income taxes with a claim that the accrued credit would then be used to recompense the Federal Government (Hanlon, Lester, & Verdi, 2015). Per se, the planned investment tax credit will lead to a possible reduction of the relative price of capital at the automobile company compared to the price of labor. Other factors constant, an isocost line will shift becoming steeper given the upsurge in wage rate (w/r). In economics, an isocost line is a representation of all amalgamations of a company’s factors of production that will result into the same total cost.
A steeper isocost line will imply that the input mix that was aimed at minimizing cost will now require less labor input and more capital, as the firm will be substituting towards capital incentive products. The result of an increased capital/labor ratio is a possible loss of jobs in the U.S (Hanlon, Lester, & Verdi, 2015). Moreover, the substitution will increase the price of labor and most firms will start moving away from the market. As such, being a representative of a local union, I will oppose this statute on investment tax credit.
Question two
Equally, investment tax credits will assist the automobile company to expand its operations in the region given that costs of production will be reduced considerably (Hanlon, Lester, & Verdi, 2015). In addition, MPL (Marginal Product of Labor) will possibly intensify with the increased use of capital implying higher wages to those workers that are still employed by the firm. The union should, therefore, favor this statute given the associated higher wages (...