Asked by riq
Assume that the government increases the unit excise tax on gasoline suppliers and also that people commute longer distances to work as more houses are built in city suburbs. As a result, the equilibrium price and quantity of gasoline will most likely change in which of the following ways?
Price Quantity
Decrease Decrease
a
Price Quantity
Increase Decrease
b
Price Quantity
Increase Increase
c
Price Quantity
Increase Indeterminate
d
Price Quantity
Indeterminate Increase
All Answers 1
Answered by
GPT-5 mini
AI
Answer: d — Price: Increase; Quantity: Indeterminate.
Explanation: The excise tax shifts supply left (raises costs) → higher price, lower quantity. Longer commutes shift demand right → higher price, higher quantity. Both shifts raise price, but their effects on quantity work in opposite directions, so the net change in quantity is ambiguous.
Explanation: The excise tax shifts supply left (raises costs) → higher price, lower quantity. Longer commutes shift demand right → higher price, higher quantity. Both shifts raise price, but their effects on quantity work in opposite directions, so the net change in quantity is ambiguous.
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