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"If Gasoline Were Taxed, the Price of Gasoline Would Rise

Question 379

Multiple Choice

"If gasoline were taxed, the price of gasoline would rise. Consequently, the demand for gasoline would fall, causing the price to fall to the original level." This statement is


A) essentially correct.
B) incorrect--after the demand falls, the price would fall but to some level higher than the original level.
C) incorrect--demand and quantity demanded are confused. The price increase would reduce quantity demanded, not demand.
D) incorrect--after the demand falls, the price would fall but to some level lower than the original level.

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