Assume that a temporary tax break has been put in place that allows for an increase in allowable depreciation.If and when the government changes the depreciation allowance back to its original amount,this should cause the
A) uc curve to shift down.
B) uc curve to shift up.
C) MPKᵉ curve to shift to the right.
D) MPKᵉ curve to shift to the left.

Question

Quizplus · Accepted Answer

When the government changes the depreciation allowance back to its original amount, the user cost of capital (uc) increases, causing the uc curve to shift up.

Assume That a Temporary Tax Break Has Been Put in Place