Suppose That the EPA Has Proposed Strict Controls on the Amount

question 16

Multiple Choice

Suppose that the EPA has proposed strict controls on the amount of sulfur that diesel fuel contains.These controls were designed to fully offset the cost of pollution generated by diesel fuel vehicles.The effect of the regulation is estimated to increase the equilibrium price of a gallon of diesel fuel by 10 cents.
Refer to the information given above.Suppose that demand for diesel fuel is perfectly inelastic and supply has a positive slope.The effect of the regulation will _______ than if demand were not perfectly inelastic.

• A)increase price and quantity by more
• B)Increase price by less and reduce quantity by more
• C)decrease price and quantity by more
• D)increase price by more and reduce quantity by less

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Definitions:

Government Size

Refers to the scope and scale of government operations and activities, including public spending, taxation, and the number of employees.

Tax-Transfer Activities

Government actions involving the collection of taxes and redistribution of income through spending and transfers to achieve economic objectives.

Opportunity Costs

The loss of potential gain from other alternatives when one alternative is chosen, representing the cost of forgone options.

Goods And Services

The physical items (goods) and activities (services) that satisfy human wants or needs and are available for purchase.