1.6. As we learned in Chapter 4, the competitive market equilibrium maximizes gains from trade.

Taxes and subsidies, by altering the market outcome, reduce the gains from trade. Does this happen primarily because of the impact of taxes and subsidie on prices, or the impact of taxes and subsidie on quantities?

c. The chapter began by discussing another tax that targets wealthy individuals: the e tate tax. Comment on the effectivene s of thi tax (in terms of government revenue), con sidering the demand of wealthy individual for leaving an inheritance.