With a simple assumption on the cost function, an earlier article shows that an
increase in profit tax will increase the joint production. This note provides a
complement to that study by considering the case in which the method of endogenous
cost allocation is appropriate. The previous result still holds in our framework with
some additional assumptions on the demand function.
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References
1.
Deakin, E.B., and M.W. Maher.1991. Cost accounting. Homewood, IL: Irwin.
2.
Kreutzer, D., and D.R. Lee.1987. Joint products and a positive response to a profit tax. Public Finance Quarterly15:98-104.
3.
Vickrey, W.1960. Can exercises lower prices? In Essays in economics and econometrics, edited by Ralph Pfouts. Chapel Hill, NC: University of North Carolina Press .