This paper uses simple examples and diagrams to illustrate some of the more important propositions relating to producer taxation which have emerged from the literature on optimal taxation. Although a few less complex surveys of this literature are now available (Bradford and Rosen, 1976; Sandmo, 1974), most of the debate is still to be found in relatively technical papers. Since the four propositions here examined are important, we feel that their separation from the technical literature may serve a useful pedagogical purpose.
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