A student makes the following statement: “If the federal government raises the sales tax on gasoline...

A student makes the following statement: “If the federal government raises the sales tax on gasoline by $0.25, then the price of gasoline will rise by $0.25. Consumers can’t get by without gasoline, so they have to pay the whole amount of any increase in the sales tax.” Under what circumstances will the student’s statement be true? Illustrate your answer with a graph of the market for gasoline.

Expert Solution

Rahul Sunny answered 8 months ago

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In the US, the federal government charges a tax of 18.3 cents per gallon of gasoline...

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Assume the federal government replaces the federal income tax with national sales tax on all consumption...

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A student makes the following statement: “If the federal government raises the sales tax on gasoline...

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Related Solutions

Assume the federal government replaces the federal income tax with a sales tax placed on consumption...

In the US, the federal government charges a tax of 18.3 cents per gallon of gasoline...

In the US, the federal government charges a tax of 18.3 cents per gallon of gasoline...

Assume the federal government replaces the federal income tax with national sales tax on all consumption...

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