Juiz: Chapter 5, 6, and 7 Quiz This Question: 5 pts 7 of 20(7 compiete) Washingt

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Juiz: Chapter 5, 6, and 7 Quiz This Question: 5 pts 7 of 20(7 compiete) Washington State gas taxes will rise by 7e a gallon now and by a further 4 9e a gallon next summer If the demand for gasoline is inelastic and the supply of gasoline is elastic, who will pay more of the increase in Washington's gas tax drivers or the gasoline companies? If the demand for gasoline is inelastic and the supply of gasoline is elastic O A. drivers will pay more of the increase in the gas tax than gasoline companies O B. divers and gasoine companies will spit the increase in the gas tax equally O C. drivers will pay all of the increase in the gus tax because gasoline companies will raise the price by the fullamount of the tax O D. gasoline companies will pay more of the increase in the gas tax than drivers if big trucks switch to natural gas in response to the higher gasoline tax, how will tho tax incidence change? The demand for gasoline (and diesel) will become o A. more inelastic, drivers will fal and the share paid by gasoline companies wil rise B. less nelaste, drivers wil rise and the share pad by gasoline companies will tall so the share of the tax paid by O C. less inelastic; drivers will fall and the share paid by gasoline companies will rise O D. more inelastic, drivers will rise and the share paid by gasoline companies will tal O Type here to search

Explanation / Answer

1) option A is correct, drivers will pay more of the increase in the gas tax than gasoline companies. (Full burden will be born by drivers in case supply is perfectly elastic)

2) The demand for gasoline would become less inelastic (presence of substitute), so the share paid by drivers would fall and that paid by companies would rise. (Option C)

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