Figure 5-13

Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production.
-Refer to Figure 5-13.The gasoline tax raises the price paid by consumers by ________ per gallon.

Question

Figure 5-13
  
Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production.
-Refer to Figure 5-13.The gasoline tax raises the price paid by consumers by ________ per gallon.

Quizplus · Accepted Answer

Before the tax, the equilibrium price was $2.50 per gallon and the equilibrium quantity was 80 billion gallons. After the tax, the supply curve shifts upward by $0.50 per gallon, and the new equilibrium price is $3.00 per gallon. This means the tax raises the price paid by consumers by $0.50 per gallon. Therefore, the correct answer is B) $1.25.

Figure 5-13 Figure 5-13 Illustrates the Market for Gasoline Before and After