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Unformatted text preview: from sellers as it would be if a $10 per unit subsidy were paid to buyers of this good. Note: See the discussion of subsidies and exercise on p 75 False 4. The government introduces a tax of $1 per gallon on orange juice, which it collects from orange juice consumers. At the same time, the government introduces a subsidy of $1 per gallon on orange juice sold, which it pays to orange juice sellers. In equilibrium, the net effects of the two programs is to increase the profits of orange juice suppliers, but might either increase or decrease the consumers' surplus of orange juice buyers. See the discussion of subsidies and exercise on pp 75-76 False 5. If the supply curve for a good is perfectly inelastic, then the excess burden associated with the tax is at least as large as the tax revenue collected by the tax. See homework problem 3.7...
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- Fall '07