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Consider the market for soft drinks. You know that the demand curve in this market contains the points (Q, P) = (100,000, $1.00) and (50,000, $2.00). You also know that the demand curve is linear. The linear supply curve contains the points (Q, P) = (0, $0) and (50,000, $1). The government decides they want to decrease consumption of soft drinks from its current equilibrium level to 50,000 drinks. You are asked to analyze this situation and provide answers to the following questions.

a. How big an excise tax will the government need to implement in order to reduce consumption to 50,000drinks?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91721531

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