### Optimal output before and after the tax

##### Reference no: EM138607

Q. The long-run cost function for LeAnn's telecommunication firm is: C(q) = 0.03q2. A local telecommunication tax of \$0.01 has been implemented for each unit LeAnn sells. This implies the marginal cost function becomes: MC(q, t) = 0.06q + t. If LeAnn can sell all the units she produces at the market price of \$0.70, Compute LeAnn's optimal output before and after the tax. What effect did the tax have on LeAnn's output level? How LeAnn's did profits change?

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