Megacola faces demand of Q = 2,200 20P. Its costs are constant at $5 per unit.

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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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Public Finance and Public Policy

ISBN: 978-1429278454

4th edition

Authors: Jonathan Gruber

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Question Posted: Apr 25, 2015 07:46 AM

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Megacola faces demand of Q = 2,200 20P. Its costs are constant at $5 per unit.

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a A tax on profits does not change the basic relationship between marginal cost and marginal revenue ...View the full answer

Public Finance and Public Policy

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