Question 3 options: Suppose the government increases the excise tax...

Question

Question 3 options:

Suppose the government increases the excise tax on gasoline by $0.2, which is imposed on the seller (the seller has to pay the tax to the government).. The equilibrium price was $1.00 and the equilibrium quantity sold was 5 mio. gallons before the taxes were increased. The new equilibrium price is $1.1 and the new equilibrium quantity is 4 mio. gallons.

The figure below illustrates the changes from an excise tax.

Image transcription text

P S1 SO ........ Ps=1.1 Ps=1 Ps=0.9 D 4 5 Q

Calculate the tax income for the government. Answers should be in millions, so 200000 should be entered as 0.2:

Answer 1

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