Suppose that the government levies a tax on oil companies


Suppose that the government levies a tax on oil companies equal to a proportion of the value of the company’s oil reserves. (The government assures the firms that the tax is for one time only.) According to the neoclassical model, what effect will the tax have on business fixed investment by these firms? What if these firms face financing constraints?

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Business Economics: Suppose that the government levies a tax on oil companies
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