Asked by Jonthan Cadenhead on Mar 10, 2024
Verified
If a federal gasoline tax of $1 per gallon goes into effect,in an attempt to promote conservation of energy,the result would be to
A) increase both equilibrium price and quantity for gasoline.
B) decrease both equilibrium price and quantity for gasoline.
C) increase the equilibrium price and decrease the equilibrium quantity for gasoline.
D) decrease the equilibrium price and decrease the equilibrium quantity for gasoline.
A) increase both equilibrium price and quantity for gasoline.
B) decrease both equilibrium price and quantity for gasoline.
C) increase the equilibrium price and decrease the equilibrium quantity for gasoline.
D) decrease the equilibrium price and decrease the equilibrium quantity for gasoline.
Equilibrium Price
The market price at which the quantity of goods supplied is equal to the quantity of goods demanded, clearing the market.
Equilibrium Quantity
The quantity of goods or services that is supplied and demanded at the point where the supply and demand curves intersect.
- Determine the effects of taxes on market equilibrium.
Verified Answer
SP
Shivani Patel
Mar 10, 2024
Final Answer :
C
Explanation :
A federal gasoline tax of $1 per gallon will increase the cost of production for gasoline suppliers, which will increase the price of gasoline. This will shift the supply curve to the left, decreasing the equilibrium quantity, and increasing the equilibrium price. Therefore, the correct option is C.
Learning Objectives
- Determine the effects of taxes on market equilibrium.