please only do: if you can teach explain steps of how to solve each part 21. In Italy, firms pay tax on reported profits at a constant proportionate rate t€ (0, 1). If thefirm's profit is, the owner of the firm can choose to report any amount of profit r where0 ≤r ≤, and thus pay tr in tax. However, if the firm is audited, it must pay additional taxon unreported profit -r at a rate of t+f, where 0

Audited Probability = P Non-audited probability = (1-P) Tax reported without an audit = tr

21. In Italy, firms pay tax on reported profits at a constant proportionate rate t € (0, 1). If the firm's profit is a, the owner of the firm can choose to report any amount of profit r where 0 ≤ ≤, and thus pay tr in tax. However, if the firm is audited, it must pay additional tax on unreported profit -r at a rate of t+f, where 0

21. In Italy, firms pay tax on reported profits at a constant proportionate rate t € (0, 1). If the firm's profit is a, the owner of the firm can choose to report any amount of profit r where 0 ≤ ≤, and thus pay tr in tax. However, if the firm is audited, it must pay additional tax on unreported profit -r at a rate of t+f, where 0

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter18: Asymmetric Information

Section: Chapter Questions

Problem 18.10P

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