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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 Summary

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

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

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