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19 download_doc-2.php - G202(1/21/09) MarketsandEfficiency

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G202 (1/21/09) Markets and Efficiency (1) Below Qe, you are giving up producing some units that are valued more  than their productive costs (2) Beyond Qe, you are producing in a range where the units are valued  less than their productive costs (3) At Qe: Efficiency occurs The Effects of Taxes Taxes imposed on sellers:      cause an inward shift of the supply curve  (decreased supply). Taxes on sellers raise the costs of production. General Results of a tax: Government revenue is collected. Increased prices to buyers. Consumer surplus decreases Decreased prices to sellers. Producer surplus decreases Reduced quantity bought and sold. Inefficiency can be reduced or increased depending on the state of  the market before the tax. Taxes and the Laffer Curve Is there a limit on the amount of tax revenue government can generate? Yes, the Laffer curve will illustrate this as it plots the relationship 
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This note was uploaded on 04/18/2011 for the course BUS 202 taught by Professor Kreft during the Winter '09 term at Indiana.

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19 download_doc-2.php - G202(1/21/09) MarketsandEfficiency

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