Impact of tax on profit maximizing output and pricing

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Reference no: EM1317124 , Length: 300

Assume that your firm above is the N.Y. Yankees and the league owners impose a lump sum tax of $4 million dollars on your firm. How will the tax affect your profit maximizing output and pricing decision (view output as a measure of desired run production or wins for the season if you like). Explain your reasoning. Now assume that the league owners impose a tax of 25 percent on costs that are above $500,000. Calculate your optimal output and pricing decision, and your profits.

Reference no: EM1317124

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