7. Problems and Applications Q7 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. Suppose they decided to impose the tax on producers. In the following graph, shows the effect of a $0.50 tax on each gallon of gasoline sold imposed on producers by shifting the demand or supply curve. ? Price of Gasoline (Dollars per gallon) 3.0 2.5 2.0 1.5 1.0 0.5 0 0 3 4 Supply 1 2 5 Quantity of Gasoline (Thousands of gallons) Demand 6 Demand Supply

7. Problems and Applications Q7 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. Suppose they decided to impose the tax on producers. In the following graph, shows the effect of a $0.50 tax on each gallon of gasoline sold imposed on producers by shifting the demand or supply curve. ? Price of Gasoline (Dollars per gallon) 3.0 2.5 2.0 1.5 1.0 0.5 0 0 3 4 Supply 1 2 5 Quantity of Gasoline (Thousands of gallons) Demand 6 Demand Supply

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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7. Problems and Applications Q7
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.
Suppose they decided to impose the tax on producers.
In the following graph, shows the effect of a $0.50 tax on each gallon of gasoline sold imposed on producers by shifting the demand or supply curve.
Price of Gasoline (Dollars per gallon)
3.0
2.5
2.0
1.5
1.0
0.5
0
0
3
Supply
1
2
5
Quantity of Gasoline (Thousands of gallons)
4
Demand
6
Demand
Supply
(?)

True or False: The price consumers pay will be higher if the tax were imposed on producers.
True
False
This tax would be less effective in reducing the quantity of gasoline consumed if the demand for gasoline were
True or False: Consumers of gasoline are hurt by this tax.
True
False
Workers in the oil industry are
by this tax.
elastic.

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