e) Suppose that the government is looking to tax Rugby AU to raise revenue for building new sport facilities for kids and hires you to advise which one of the taxes above – a tax per unit or a lump sum – to implement. Which one of the two taxes would you recommend? Justify and explain why.
e) Suppose that the government is looking to tax Rugby AU to raise revenue for building new sport facilities for kids and hires you to advise which one of the taxes above – a tax per unit or a lump sum – to implement. Which one of the two taxes would you recommend? Justify and explain why.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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hi how about the answer for part d and e?
d) Lump sum tax (LS): Instead of a tax per unit, the government imposes a lump tax of
$400 on Rugby AU. Find the new optimal price ? % &" and quantity ?%&" that Rugby AU
chooses and compute its profit ?%&" in this case.
e) Suppose that the government is looking to tax Rugby AU to raise revenue for building
new sport facilities for kids and hires you to advise which one of the taxes above – a tax per unit or a lump sum – to implement. Which one of the two taxes would you
recommend? Justify and explain why.
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