A price-taking firm has the following (pre-tax) total cost
function: C(q) = 50+30q+q^2. Price equals $200. The government is
considering the following taxation policies: (a) an excise tax of
$30/unit and (b) a tax of profit of 50%. Which of the following is
true?
A Price Taking Firm Has The Following Pre Tax Total Cost Function C Q 50 30q Q 2 Price Equals 200 The Governmen 1 (145.12 KiB) Viewed 39 times
a. Profit-maximizing quantity produced under the excise tax equals profit-maximizing quantity under the profit tax. b. Profit-maximizing quantity produced under the excise tax is higher than profit-maximizing quantity under the profit tax. *c. Profit-maximizing quantity produced under the excise tax is lower than profit-maximizing quantity under the profit tax. d. Profit-maximizing quantity produced under the excise tax and profit-maximizing quantity under the profit tax cannot be compared
Join a community of subject matter experts. Register for FREE to view solutions, replies, and use search function. Request answer by replying!