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Unformatted text preview: doing nothing. A. Make cocaine illegal and devote law enforcement resources to the interdiction of drug
B. Make cocaine legal and levy a large quantity tax.
4. To achieve a given reduction in drugs consumed, must the tax be larger or smaller if demand
is inelastic compared to when demand is elastic? Demonstrate with a graph.
5. Suppose the government is considering a gun buying program. The program consists of the
government buying some fixed number N of guns at the market-clearing price. What would you
predict would be the effect of this program on (1) the equilibrium price of guns in the market; (2)
the total quantity of guns produced; and (3) the quantity of guns bought by private...
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This document was uploaded on 02/18/2014 for the course ECON 130 at UCSD.
- Fall '08
- Consumer Surplus