An institution is a significant practice, relationship, or organization in a society. institutions shape the environment in which decisions are made, and they affect production and income in a nation. the most significant institutions are private property rights, political stability and the rule of law, open and competitive markets, efficient taxes, and stable money and stable prices. complete each of the following sentences with the correct institution. a. the single greatest incentive for voluntary production is the existence ofprivate property rights .b. political stability and the rule of law increase investment in physical and human capital because they increase the predictability of future payoffs. c. specialization is more likely to occur in nations withopen and competitive markets and result in more efficient production because of economies of scale. d. the xiaogang agreement that led to an agricultural boom in china is an example of the power ofprivate property rights .

9. tax types: taxes are classified based on whether they are applied directly to income, called direct taxes, or to some other measurable performance characteristic of the firm, called indirect taxes. identify each of the following as a “direct tax,” an “indirect tax,” or something else: a. corporate income tax paid by a japanese subsidiary on its operating income b. royalties paid to saudi arabia for oil extracted and shipped to world markets c. interest received by a u.s. parent on bank deposits held in london d. interest received by a u.s. parent on a loan to a subsidiary in mexico e. principal repayment received by u.s. parent from belgium on a loan to a wholly owned subsidiary in belgium f. excise tax paid on cigarettes manufactured and sold within the united states g. property taxes paid on the corporate headquarters building in seattle h. a direct contribution to the international committee of the red cross for refugee relief i. deferred income tax, shown as a deduction on the u.s. parent’s consolidated income tax j. withholding taxes withheld by germany on dividends paid to a united kingdom parent corporation