Calculate the tax incidence

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Reference no: EM138718

Q1. Why might you expect to see flat royalty payments in home-based franchises but revenue-based royalties in franchisees that operate from commercial buildings? (Hint: Among the most popular home-based franchises are cleaning services offered to businesses, and delivery services for seniors who live at home.)
a. Is your explanation consistent with the fact franchised tutoring services often charge a fixed royalty per student enrolled?

Q2. A monopolist has the following demand equation: Q=200-2P. Its marginal cost function is MC=10+2Q.

A. What is the equilibrium quantity and price?

B. Assume a tax of 20 is applied to the monopolist. What is the equilibrium quantity and price?

C. Calculate the tax incidence of the buyers and the monopolist.

Reference no: EM138718

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