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Tax to achieve the efficient level of consumption

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Now suppose that instead of using the price floor to restrict consumption, the government decides to impose a tax on alcohol ($x on each unit of alcohol sold).

a. Can such a tax achieve an efficient level of consumption? Explain.

b. In light of your answer to part a, if you were advising the government, would you recommend implementing a price floor or tax to achieve the efficient level of consumption? [Hint: think about tax revenue.]

Reference no: EM132505239

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