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Taxes and Subsidies: End of Chapter Problem As we learned in Chapter 4, the competitive market equilibrium maximizes gains from trade. Taxes and subsidies, by

Taxes and Subsidies: End of Chapter Problem 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. This happens primarily because of the impact that taxes and subsidies have on quantities - due to there being transactions under taxes and transactions under subsidies

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