Consider the market for butter, shown in the accompanying figure. The government imposes an excise tax of
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Consider the market for butter, shown in the accompanying figure. The government imposes an excise tax of $0.30 per pound of butter. What is the price paid by consumers post-tax? What is the price received by producers post-tax? What is the quantity of butter transacted? How is the incidence of the tax allocated between consumers and producers? Show this on the figure.
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