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Homework answers / question archive / Suppose that the government puts a tax of 15 cents a gallon on gasoline and then later decides to put a subsidy on gasoline at a rate of 7 cents a gallon

Suppose that the government puts a tax of 15 cents a gallon on gasoline and then later decides to put a subsidy on gasoline at a rate of 7 cents a gallon

Economics

Suppose that the government puts a tax of 15 cents a gallon on gasoline

and then later decides to put a subsidy on gasoline at a rate of 7 cents a

gallon. What net tax is this combination equivalent to?

pur-new-sol

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This combination equivalent is equivalent to a net tax of 8 cents

Explanation

Tax per gallon = 15 cents

Subsidy per gallon = 7 cents

Net tax per gallon = Tax per gallon - Subsidy per gallon = 15 cents - 7 cents = 8 cents