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    Government wants to maximize its tax revenue and it can place only $2 per-unit tax on one of two goods. It should place the tax on the production of the good whose demand curve has the:

    A) higher price elasticity of demand
    B) lower price elasticity of demand
    C) greater length
    D) shorter length

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    Solution Preview

    Because sales tax will result in an increase in price and we know that the higher price the lower consumption of the good. ...

    Solution Summary

    This solution discusses how the government can maximize its tax revenue.