Question: The government of Granita is thinking about imposing a very
The government of Granita is thinking about imposing a very small tax on one or more of the following goods: anvils, books, and cardigans. Anvils and books are both produced in competitive markets with constant marginal costs, while cardigans are produced by a monopoly with constant marginal costs. The elasticities of demand forthe three goods are –3, –1.5, and –1. What good or goods should the government put the very small tax on if it wants to minimize the deadweight burden?
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