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The diagram below shows the original equilibrium demand and supply for Good X at point A. The government then decides to introduce a tax on
The diagram below shows the original equilibrium demand and supply for Good X at point A. The government then decides to introduce a tax on Good X. Price Supply + Tax Supply 6 3 Demand 40 50 Quantity a) Using the figure above: i. What is the amount of tax per unit of good x sold? (2 marks) ii. What proportion of the tax is paid by the consumer? (2 marks) ili. What proportion of the tax is paid by the producer? (2 marks) iv. What will be the amount of tax revenue paid to the government? (2 marks) v. What is the producer's revenue? (2 marks) b) Distinguish carefully between tax avoidance and tax evasion. (4 marks) c. Discuss one way in which government policy may facilitate tax avoidance and one way in which government policy may influence tax evasion. (6 marks)
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