Find the dollar value of a per unit gasoline tax that would achieve the efficient solution, and calculate the resulting tax revenues generated to government.
As an economic consultant to the federal government, you recommend a market-based national policy response to global warming. In particular, you suggest using a pollution charge, which can be implemented as a gasoline tax. Based on your estimates, the marginal benefits and costs per gallon of gasoline are modeled as follows:
MPB = 10 ? 0.7Q MEB = ? 0.05Q MSC = MPC = 1 + 0.15Q,
where Q is in millions of gallons.
The tax should equal the absolute value of the MEB at the efficient output level, found as follows:
Tax = MEB = ?–0.05(10)? = 50 cents per gallon
Therefore, tax revenues = 0.50 (10 million) = $5 million
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Long lags associated with the legislative process in implementing fiscal policy make it more difficult to use than monetary policy
Indicate whether the statement is true or false
The market supply curve for a product:
A. is the supply of an individual consumer. B. will lie to the right of all of the individual supply curves for a product. C. graphically is the vertical sum of the individual supply curves. D. will lie above all of the individual supply curves for a product.
Assume the government decides to reduce spending in order to reduce the budget deficit, which it financed by borrowing in the real credit market. Where and how should you begin your analysis when analyzing the chain reaction of economic interactions?
a. Start the analysis in the real goods market with aggregate demand shifting to the left. b. Start the analysis in the real goods market with aggregate demand shifting to the right. c. Start the analysis in the real goods market with aggregate supply shifting to the left. d. Start the analysis in the real goods market with aggregate supply shifting to the right. e. Start the analysis in the real credit market with demand for real credit shifting to the left.
Anita is studying for history and economics. Based on the production possibilities curve, if Anita uses her study time to get the same grade in each class, what will that grade be?
a. A
b. B
c. C
d. D