To raise revenues for highway construction, the federal government raises the per gallon tax on gasoline...

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To raise revenues for highway construction, the federal government raises the per gallon tax on gasoline by 50 cents. In consequence, in the short run, other things equal, we would expect: because household budgets are strapped owing to the recession, the full extent of the tax impacts profits of gas stations. supply curves to shift vertically upward by 50 cents per gallon (reduction in supply), but the equilibrium price rises by less than 50 cents as consumers respond by driving less. gas prices to rise by more than 50 cents per gallon as major oil companies use the excuse of the federal tax increase to increase the price even more. gas prices to rise by at least 50 cents per gallon. To raise revenues for highway construction, the federal government raises the per gallon tax on gasoline by 50 cents. In consequence, in the short run, other things equal, we would expect: because household budgets are strapped owing to the recession, the full extent of the tax impacts profits of gas stations. supply curves to shift vertically upward by 50 cents per gallon (reduction in supply), but the equilibrium price rises by less than 50 cents as consumers respond by driving less. gas prices to rise by more than 50 cents per gallon as major oil companies use the excuse of the federal tax increase to increase the price even more. gas prices to rise by at least 50 cents per gallon.

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