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26 August, 19:56

After a tax is imposed on the buyers of bottled water, the price buyers pay is $2.50 per bottle and the price sellers receive is $1.75. If the equilibrium price was $2.00 before the tax was imposed on the market, how much is the tax per unit

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  1. 26 August, 20:26
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    Tax per unit = $0.75

    Explanation:

    Given:

    Buyers pay per unit = $2.50

    Sellers receive per unit = $1.75

    Equilibrium price = $2.00

    Tax per unit = ?

    Computation of tax per unit:

    Tax per unit = Margin between Buyers pay and Sellers receive.

    Tax per unit = Buyers pay per unit - Sellers receive per unit

    Tax per unit = $2.50 - $1.75

    Tax per unit = $0.75
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