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Consider a Small Firm That Is Producing Winter Coats

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Consider a small firm that is producing winter coats. It can lease an additional sewing machine for one month for $1200. With this additional machine, the firm can produce an additional 7 coats during that time period that it sells for $250 each. Hiring the marginal machine adds to the firm's profit and so it should _ the machine.


Definitions:

Tax Impact

The effect that taxation has on individual or corporate financial conditions.

Inelastic Demand

A situation where the demand for a product does not significantly change with a change in its price.

Elastic Supply

A situation where the quantity supplied of a good changes significantly as the price changes.

Tax Burden

The total amount of tax that individuals, businesses, or other entities must pay to authorities, often expressed as a percentage of income or revenue.

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