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Suppose a local government votes to impose an excise tax of $1.20 per bottle on the sales of bottled water. (Assume that all bottles
Suppose a local government votes to impose an excise tax of $1.20 per bottle on the sales of bottled water. (Assume that all bottles are identical and residents cannot shop elsewhere.) Before the tax the equilibrium price and quantity are $1.10 and 2000 bottles per day. After the tax is imposed, market equilibrium adjusts to a price of $2.00 and quantity of 1500 bottles per day. a. Draw the supply and demand diagram before and after the excise tax is imposed. 1.) Using the line drawing tool, plot the original and new supply curves and label the lines properly. 2.) Using the point drawing tool, indicate the original and new equilibrium points and label these points properly. Carefully follow the instructions above, and only draw the required objects. CIIS Price ($ per bottle) 3.00- 2.80- 2.60 2.40 2.20- 2.00- 1.80- 1.60- 1.40- 1.20 1.00- 0.80 0.60- 0.40- 0.20 0.00+ 0 1000 2000 Quantity (bottles per day) D
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