When traveling on vacation in a country with a large consumption tax, you are presented with a deal: pay cash and get a 10% discount. Given that credit card transactions cost the merchant less than 2%, why did the merchant make this offer?

Would the merchant be more or less likely to make the offer if the country had a value-added tax instead? Explain.

The indicates a question that requires students to apply the empirical economics principles and the Empirical Evidence boxes.