You are an economic advisor to the Treasurer of the United States. Congress is considering increasing...

You are an economic advisor to the Treasurer of the United States. Congress is considering increasing the sales tax on gasoline by $.03 per gallon. Last year motorists purchased 10 million gallons of gas per month. The demand curve is such that every $.01 increase in price decreases sales by 100,000 gallons per month. You also know that for every $.01 increase in price, producers are willing to provide 50,000 more gallons of gasoline to the market. The legislature has stated that the $.03 tax will increase government revenues by $300,000 per month and raise the price of gasoline by $.03 per gallon. Is this correct? Explain and show your work.

Expert Solution

Rahul Sunny answered 8 months ago

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You are an economic advisor to the Treasurer of the United States. Congress is considering increasing...

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You are an economic advisor to the Treasurer of the United States. Congress is considering increasing...

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