A Question per day - Day 8

1. Suppose Congress is considering two types of handgun legislation (only one can be passed), where both are intended to decrease the number of handguns circulating within the economy. Those bills are as follows:

  • Bill One - in order to sell handguns, firms must purchase an annual license
  • Bill Two - a per unit tax is placed on handgun sales (on suppliers)

    Assume that the retail handgun market is perfectly competitive.

    a. How would these two pieces of legislation affect the handgun market?
    b. Would these bills each achieve the intent of Congress here? Explain.