Suppose the government imposes a specific tax per unit on a…
Suppose the government imposes a specific tax per unit on a good sold in a perfectly competitive market. Demand for the good is given by QD = 100 – 2 P and supply is given by QS = 4 P. Where P is the price consumers pay. Assume the tax revenue is rebated lump-sum to consumers. Which of the following statements is most accurate regarding the welfare effects of the tax?
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