Reference no: EM1365325

1. You are assistant to a senator who chairs an as hoc committee on reforming taxes on telecommunication services. Based on your research, AT&T has spent over$15 million on related paperwork and compliance cost. Moreover, depending on the locale, telecom taxes can amount to as much as 25% of a consumer's phone bill. These high tax rates on telecom services have become quite controversial, due to the fact that the deregulation of telecom industry has led to a highly competitive market. Your best estimeate indicates that, based on current tax rates, the monthly market demand for telecommunication services is given by Qd = 250 -5P and the market supply (including taxes) is Qs = 4P -110 (both in millions), where P is the montly price of telecommunication service. The senator is considering tax reform that would dramatically cut tax rates, leading to a supply function under the new tax policy of Qs =4.171P- 110. How much money would a typical consumer save each month as a result of the proposed legislation?

2. Rapel Valley in Chile is renowned for its ability to produce high-quality wine at a fraction of the cost of many other vineyards around the world. Rapel Valley produces over 20 million bottles of wine annually, of which 5 million are exported to the US. Each bottle entering the US is subjected to a $0.50 per bottle excise tax, which generates about $2.5 million in tax revenue. Strong LaNina weather patterns have caused unusually cold temperatures, devastating many of the wine producers in the region of Chile. How will La Nina affect the price of Chilean wine? Assuming LaNina does not impact the California wine producing region, how will La Nina impact the market for Californian wine?