Weekly sales of doughnuts are 20 000 and the market price is £1.20 per doughnut. The government introduces a new indirect tax of 15p per doughnut. Sales fall to 16 000 a week and the price rises to £1.30 per doughnut.
The share of the total weekly tax that is borne by doughnut producers is
£800
2 )
£1000
3 )
£1600
4 )
£2400
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