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Congress and the president decide that the United States
Chapter , Problem 7(choose chapter or problem)
Congress and the president decide that the United States should reduce air pollution by reducing its use of gasoline. They impose a $0.50 tax on each gallon of gasoline sold.a.Should they impose this tax on producers or consumers? Explain carefully using a supply-and-demand diagram.b.If the demand for gasoline were more elastic, would this tax be more effective or less effective in reducing the quantity of gasoline consumed? Ex-plain with both words and a diagram.c.Are consumers of gasoline helped or hurt by this tax? Why?d.Are workers in the oil industry helped or hurt by this tax? Why?
Questions & Answers
QUESTION:
Congress and the president decide that the United States should reduce air pollution by reducing its use of gasoline. They impose a $0.50 tax on each gallon of gasoline sold.a.Should they impose this tax on producers or consumers? Explain carefully using a supply-and-demand diagram.b.If the demand for gasoline were more elastic, would this tax be more effective or less effective in reducing the quantity of gasoline consumed? Ex-plain with both words and a diagram.c.Are consumers of gasoline helped or hurt by this tax? Why?d.Are workers in the oil industry helped or hurt by this tax? Why?
ANSWER:Step 1 of 2
The equilibrium is obtained at the intersecting point of the demand and the supply curve in the market. The market forces will determine the equilibrium level and achieve the optimum point.