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标题: CMA PART 1 SU1 one question [打印本页]

作者: norgas 时间: 2008-1-7 03:50
标题: CMA PART 1 SU1 one question

I am not quite understand the sentence in Gleim CMA part 1 SU1,1.3

Per-unit tax: this tax, e.g sales, exceise, and VAT, creates a difference between demand price (what conumers are willing to pay) and the price a firm recieves.

1) The effect is to decrease marginal revenue. The firm' s response is to lower the quantity produced by moving down the marginal cost curve.

How to understand the last sentence?

Thanks a lot!

作者: hoollly 时间: 2008-1-7 15:41
marginal revenue=1
marginal revenue after VAT=0.8
marginal cost=1

Originally,in producing 1000th unit.the marginal revenue is 1 where the marginal cost is 1,so it is in equilibrium level.Adding the VAT into consideration drags down the marginal revenue to 0.8,that means,in producing the 1000th unit,marginal cost exceeds marginal revenue.
So,to prevent this loss from being occured,firm cuts its unit output to the new equilibrium level.

The marginal costs curve tends to exhibit in J shape,which lowers in the beginning and becomes higher later.

作者: norgas 时间: 2008-1-7 17:33

Thanks a lot for your reply. I got it!

You have great knowledge about part 1, since the explanaiton require the knowledge of later chapters.

BTW, have you passed PART I?

作者: hoollly 时间: 2008-1-7 19:35
Yes,I passed part1 8 months ago with 560 marks.

作者: norgas 时间: 2008-1-8 15:23

Congratulations!

I passed Part II almost one year ago!

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