A country's government is considering implementing a tax on carbon emissions to address the issue of climate change. The tax would apply to all producers of carbon emissions in the country and would be set at $50 per ton of carbon emitted. The government estimates that this tax would reduce carbon emissions by 20% in the first year of implementation. The government also estimates that the price elasticity of demand for gasoline, which is a major source of carbon emissions, is -0.3.

a) Calculate the percentage increase in the price of gasoline that would result from the carbon tax.

b) Calculate the percentage decrease in the quantity of gasoline demanded that would result from the price increase calculated in part (a).

c) Calculate the revenue that the government would collect from the carbon tax in the first year of implementation.

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The detailed answer for the above question is provided below a The carbon tax of 50 per ton of carbon emitted will increase the cost of producing gasoline which will lead to an increase in its price T... View the full answer