Suppose You Are Advising the Government on Changes in the Gasoline

question 99

Multiple Choice

Suppose you are advising the government on changes in the gasoline market.The current price is $1.00 per litre and the long-run price elasticity of demand is constant at 0.8.If a tax on gasoline causes the price to rise to $1.50 per litre,then quantity demanded is predicted to fall in the long run by

• A)12% and total expenditure will fall.
• B)24% and total expenditure will fall.
• C)32% and total expenditure will fall.
• D)24% and total expenditure will rise.
• E)50% and total expenditure will rise.

---

Definitions:

Remote-Controlled Carts

Wheeled conveyances operated from a distance using electronic remote control, often utilized for carrying goods or performing specific tasks.

Offshore Assembly Plants

Factories located in another country than where the finished product is sold, used by companies to reduce production costs.

Low Wages

Earnings that are minimal in comparison to the average or median wage levels within a specific area or industry.