Suppose a firm buys $1000 worth of inputs from other firms,hires $1000 worth of labour services,and has sales revenue of $2500.The firm's resulting profit is $500.According to a value- added tax such as the GST,this firm would pay taxes on

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The value-added tax (VAT) is applied to the value added by the firm, which is the difference between sales revenue ($2500) and the cost of inputs ($1000). Thus, the firm would pay taxes on $1500.

Suppose a Firm Buys $1000 Worth of Inputs from Other