The government decides to increase the federal gasoline tax by 50 cents to help balance the budget, reduce pollution, and improve the trade balance. Before the tax increase, the price of gas $3.50 per gallon. a). Assuming no further shifts in supply and demand, will the price of gas end up being $4, less than $4, or more than $4? Explain. b) Suppose the price of gas price paid by consumers ends up being $3.90. Consumption goes from 200 billion gallons to 180 billion. Explain whether gasoline producers are better or worse off. What about gasoline consumers? What about the economy overall? (Answer this question graphically and with explanation, calculations are for part c) 

c). Calculate the change in produce and consumer surplus results from the gas tax increase. Also calculate the deadweight loss.

Answer rating: 100% (QA)

Impact of Gasoline Tax Increase a Price of Gas After Tax Increase Assuming no further shifts in supply and demand the price of gas will end up being more than 4 Heres why The government adds a 50cent ... View the full answer