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

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Quizplus · Accepted Answer

In the short run, a tax on corporate profits directly reduces profits in the corporate sector by increasing their costs. However, it does not directly affect the noncorporate sector, as the tax is specific to corporate profits.

Assume That Both the Corporate and Noncorporate Sectors Are in Long-Run