Calculate the tax incidence and deadweight loss

Reference no: EM131790291

Question: The market demand for stuffed rabbits is Q = 2,600 - 20P, and the government intends to place a $4 per bunny tax on stuffed rabbit purchases (tax collected from sellers). Calculate the tax incidence and deadweight loss of this tax when:

a. Supply of stuffed rabbits is Q = 400.

b. Supply of stuffed rabbits is Q = 12P.

c. Explain why the deadweight loss calculations differ between a and b.

Reference no: EM131790291

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