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A policy taxes a normal good and raises its price. The government also refunds enough money to the consumer so that the consumer is still able to buy their original bundle even with the higher price. 1) The consumer will buy exactly the same quantity of the good that they originally did. II) The budget line with the tax and refund will be flatter than the original budget line. Select one: a. Both statements are false. b. Both statements are true. c. Statement II is true but statement I is false. d. Statement I is true but statement II is false.

A policy taxes a normal good and raises its price. The government also refunds enough money to the consumer so that the consumer is still able to buy their original bundle even with the higher price. 1) The consumer will buy exactly the same quantity of the good that they originally did. II) The budget line with the tax and refund will be flatter than the original budget line. Select one: a. Both statements are false. b. Both statements are true. c. Statement II is true but statement I is false. d. Statement I is true but statement II is false.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A policy taxes a normal good and raises its price. The government also refunds enough money to the consumer so that the consumer is still able to buy their original bundle even with the higher price. 1) The consumer will buy exactly the same quantity of the good that they originally did. II) The budget line with the tax and refund will be flatter than the original budget line. Select one: a. Both statements are false. b. Both statements are true. c. Statement II is true but statement I is false. d. Statement I is true but statement II is false.
Transcribed Image Text:A policy taxes a normal good and raises its price. The government also refunds enough money to the consumer so that the consumer is still able to buy their original bundle even with the higher price. 1) The consumer will buy exactly the same quantity of the good that they originally did. II) The budget line with the tax and refund will be flatter than the original budget line. Select one: a. Both statements are false. b. Both statements are true. c. Statement II is true but statement I is false. d. Statement I is true but statement II is false.
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