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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. What net tax is this combination equivalent to?
Expert Solution
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
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