=+A. Explain why the following either cannot happen or, if you think it can happen, how: a.
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=+A. Explain why the following either cannot happen or, if you think it can happen, how:
a. Own-price demand for a good is perfectly vertical but taxing the good produces a deadweight loss.
b. Own-price demand is downward sloping (not vertical) and there is no deadweight loss from taxing the good.
B. Now suppose that the consumer’s tastes can be summarized by the CES utility function u1x1
, x2 2 5 10.5x1 2r 1 0.5x2 2r 2 21/r
.
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Related Book For 
Microeconomics An Intuitive Approach With Calculus
ISBN: 9781337335652,9781337027632
2nd Edition
Authors: Thomas Nechyba
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