Megacola faces demand of Q 2 200 20P Its
Megacola faces demand of Q = 2,200 – 20P. Its costs are constant at $5 per unit.
a. Show that Megacola will not change its behavior if the government introduces a 20% tax on its profits.
b. Does the existence of firms such as Megacola strengthen or weaken the case for a corporate income tax? Explain.
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