MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
9th Edition
ISBN: 2810022149537
Author: Baye
Publisher: MCG
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Chapter 2, Problem 16PAA
To determine
To find:
The savings by consumer due to proposed legislation.
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The Senate committee is working on tax reform for telecommunications services in the USA. After deregulation, the telecom market has become very competitive and the high telecom tax rate (25%) reduces business growth. Estimates indicate that the current monthly demand for telecom services is given by Q^d=300-4P and the market supply is Q^s=3P-120P (both in millions), where P is the monthly price of telecom services. The Commission plans tax reform that would cut a tax rate to 15%, leading to a new supply function Q^s=4P-60. How much will the customer save on average during a month as a result of the proposed legislation? How will tax revenues change?
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Federal and provincial taxes are currently $50 per carton.
Suppose the two levels of government wish to increase
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Chapter 2 Solutions
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