Suppose that all consumers view red pencils and blue pencils as perfect substitutes. Suppose that the supply
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Suppose that all consumers view red pencils and blue pencils as perfect substitutes. Suppose that the supply curve for red pencils is upward sloping. Let the price of red pencils and blue pencils be pr and pb. What would happen if the government put a tax only on red pencils?
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In this case the demand curve for red pencils is horizontal at the price p b since tha...View the full answer
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