Question

Concerns about the environment prompt Congress to pass a $1 surcharge tax on each gallon of gasoline. Which statement best describes the impact of such a tax? A) Because of high elasticity of demand for gasoline, additional taxes would likely have little impact on demand. B) An additional excise tax could make the market for gasoline more efficient by eliminating excessive consumption. C) The tax would accelerate rapid transition to electric vehicles, lead to increasing GDP and lower rates of unemployment. D) Production and shipping costs would increase, thus increasing the cost of consumer goods and services. These higher costs co

Answer 1

Hi,

First, we are going to discuss about surcharge tax.

SURCHARGE TAX:  

It is an extra charge. We can also say that it is an additional or extra tax. But the important thing is that this is applicable to actual tax money.

For example, if there is 30% tax on gasoline already. Then 1% surcharge means 1% of 30% which is 0.3%. So Total tax will become 33.3% on each gallon of gasoline.

                      -----   Option A is the right option for it.  -----

Because of the high elasticity of demand for gasoline, additional taxes would likely have little impact on demand.

Answer 2

D) Production and shipping costs would increase, thus increasing the cost of consumer goods and services. These higher costs could likely lead to slowing economic growth.