Suppose that a firm has to pay a 10% tax on its total revenue.This has the effect of ?
A)flattening marginal cost.
B)increasing marginal revenue.
C)decreasing marginal cost.
D)decreasing marginal revenue.

Question

Quizplus · Accepted Answer

The tax of 10% on total revenue will decrease the overall revenue the firm receives. This will lead to a decrease in marginal revenue, as the additional revenue earned from each additional unit sold will be reduced by the tax.

Suppose That a Firm Has to Pay a 10% Tax