In: Economics
You are an assistant to a senator who chairs an ad hoc committee
on reforming taxes on telecommunication services. Based on your
research, AT&T has spent over $15 million on related paperwork
and compliance costs. Moreover, depending on the locale, telecom
taxes can amount to as much as 25 percent of a consumer’s phone
bill. These high tax rates on telecom services have become quite
controversial, due to the fact that the deregulation of the telecom
industry has led to a highly competitive market. Your best
estimates indicate that, based on current tax rates, the monthly
market demand for telecommunication services is given by
Qd = 300 - 4P and the market supply (including taxes) is
QS = 2P - 120 (both in millions), where P is the monthly
price of the telecommunication services.
The senator is considering tax reform that would dramatically cut
tax rates, leading to a supply function under the new tax policy of
QS = 2.3P - 120. How much money per unit would a typical
consumer save each month as a result of the proposed
legislation?
Instruction: Enter your response rounded to the
nearest penny (two decimal places).