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Taxes- Taxation on products is indirect tax, these can be of two types: Flat rate (Excise duties) or
percentage taxes (Ad Valorem ) e.g. Vat at 20%. Some examples of products that are taxed:

Petrol- excises and ad valorem to reduce consumption to stop the externality of harmful
emissions but…

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price of a negative externality is called shadow pricing. These methods are very subjective as
they rely on value judgements. This leads to government failure if the value of the negative
externality is misjudged
- Taxes increase the price and therefore decreases consumer surplus.
- The size of the tax…

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