Diagram of the life-saving surgical procedure market

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Suppose the equilibrium price for a life-saving surgical procedure (inelastic demand) is initially $10,000. Now suppose that a law is passed which requires hospitals (the suppliers of the surgical procedure) to pay a $1,000 per-unit excise tax on each procedure performed. Using a competitive supply/demand diagram of the ‘life-saving surgical procedure’ market and brief verbal descriptions, explain the legal and economic incidence of this per-unit excise tax. Make sure you make correct and adequate labeling.

Reference no: EM131004916

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