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Assume a $1 / pack excise tax is placed on the producers of grapes. This causes the price to rise from $3 / pack to
Assume a $1 / pack excise tax is placed on the producers of grapes. This causes the price to rise from $3 / pack to $3.80 / pack and causes quantity demanded to fall from 470 million packs per year to 400 million packs per year.
- Illustrate this in a S&D graph
- What price do the producers get after the tax?
- What is the tax revenue for the government? (answer in $ and make a bold line around it)
- What is the price elasticity of demand for grapes? (you will need a calculator)
- Shade in the lost consumer surplus.
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