Assume the demand and supply equations are the same as


Assume the demand and supply equations are the same as those givenin Question 11. Now assume the government introduces either aspecific excise tax of T=2 (i.e. $2) per unit, or an ad-valorem taxrate of t=0.2 (i.e. 20%). What is the new supply function in each tax regime and which tax gives the highest revenue to the government?

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Econometrics: Assume the demand and supply equations are the same as
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