Question

II. Assume that net product is produced from 50,000 identical plots of land. There are 50,000 proprietors, and each proprietor owns one plot of land. Each plot produces a net product valued at 40,000 francs per year. Annual net product will continue forever.

5. Assume, the rate of return on land is 4 percent per year. Calculate the value of a plot of land. Show your calculations.

6. Assume that each proprietor pays an identical tax. How much tax must each proprietor pay if the government is to obtain 600,000,000 francs per year? Show your calculations.

7. Calculate the maximum amount a buyer will pay for a plot of land if a tax of 12,000 francs per year is in effect and the rate of return on land is 4 percent per year. Show your calculations.

8. If government requires each proprietor to pay a tax of 12,000 francs per year, are the Physiocrats correct when they say that in effect, the government actually owns 30 percent of the country’s agricultural land? Why or why not? Explain your answer. Your answer should be brief.

9. Suppose a buyer purchases one plot of land at the price you calculated in your answer to (7). The buyer must pay 12,000 francs per year to the government. However, the Physiocrats state that the buyer of the plot of land is, in effect, paying no tax. Do you agree with the Physiocrats? Why or why not? Explain your answer. Your answer should be brief.

10. Assume that the government stops taxing land after the buyer has made her purchase. Assume the rate of return on land is 4 percent and that the value of annual net product from a plot continues to be 40,000 francs. Calculate the value of the gift the buyer has received from the government. Your answer should be brief

Answer 1

Answer for question 5

IF 40000 Francs produced consistently forever then Value can be calculated as A/i here A=40000 and i=0.04

Value of Plot =40000/0.04=100,000 Francs

Answer for 6

If Governement to collect 600,000,000 Francs from 50000 identical plots then each plot pays a tax =600,000,000/50,000=1,200 Francs

Answer for 7

Actual earnings is 28,000 forever then value of land =28000/0.04=70,000 Francs

Answer for 8

yes because tax % earned= 12000/40000=30%

Tax imposed is replication of amount paid to government for using its goods and services (resources) for a year.

I agree with this statement because we pay the portion of our profit to government assuming 30% ownership in land.