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Suppose the government decides to tax sales of pizza.
- Suppose the government decides to tax sales of pizza. Show the effect of the tax on the market for pizzas with the help of a graph. Assume the equilibrium price and quantity before the tax was imposed was $10 and 100 units. Per unit tax is $4. After the tax price and quantity are $12 and 80 units. Answer the following questions from the graph:
a. After the tax, what price do sellers receive?
b. How much revenue is collected by the government? What is the buyers share and what is the sellers share?
c. Is there any deadweight loss? Calculate.