Suppose the equilibrium price of a good with an elastic demand curve increases to $20 after a $2 per unit/tax is placed on the good. Which of the following was the most likely price before the tax? Previous price was $18 Previous price was $19 Previous price was $18.50 Previous price was $19.50
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A government imposes a $10 per-unit tax in a competitive market. Afterward, the seller's after-tax price falls from the original equilibrium price of $20 to $18. Based on this, which of the following is true? Explain why you chose that option. A) Producers are bearing 10% of the tax burden. B) The next after-tax equilibrium price will be $30. C) Consumers are bearing 80% of the tax burden. D) The government will collect less than $10 per unit exchanged of the good. E) The quantity demanded will decrease by 10%.
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