⚧ C.T.L.W. You figure it out
My Endo doc went over my blood work. "I see your estrogen level is now at 315, do you feel like you have too much Estrogen now?"
I told her "... N... N.. No..." and started crying.
Just because taxes are included in that theory doesn't change the defiition of the term.production cost
combined costs of raw material and labor incurred in producing goods
Production cost | Define Production cost at Dictionary.com
But even if taxes are included as a production cost, the profit maximization point--the point where the marginal cost curve intersects the marginal revenue curve--for an oligopoly/cartel is the same
The MC curve just pivots (turns) right without changing that intersection point. And this is exactly what you'd expect--if the company maximizes gross (before tax) profit, then the after-tax income is also maximized--it's just less than the gross profit.
Tax increases only increase prices for competitive industries, because of its effect on the whole market (industry supply curve).
A cartel functions like just one big company on the world market. If you increase the tax on it, in the worst case, the independents within the cartel may drop out and do something else, but the cartel remains. Because of that, the no. of cartels doesn't change due to the tax, so the supply curve for crude doesn't move, assuming nothing else (i. e. physical production costs) changed.
And if there is no movement of the supply curve, and no movement of the demand curve, then the price stays the same.
Last edited by solletica; 05-20-11 at 01:08 PM.