The Apple Market with a Tax: Distortionary taxes in a perfectly competitive market

An experiment from the book Experiments with Economic Principles by Theodore C. Bergstrom, Marcus Giamattei, Humberto Llavador and John H. Miller

Material for Students

Picture by: Michal Jarmoluk

There is a hint of frost in the air and the leaves are changing colors. You are at the Farmers’ Apple Market to buy and sell bushels of apples. In any single round of trading, buyers cannot buy and sellers cannot sell more than one bushel of apples, nor can anyone buy or sell fractions of a bushel of apples. In sessions 2 and 3 there is a per unit tax on transactions.

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