a. Illustrate how a supply increase of gasoline, say due to higher utilization of existing facilities by the OPEC, would affect the buyer and seller surpluses.

b. Show how a cut in gasoline tax would affect the buyer and seller surpluses, and explain why the governments are reluctant to offer tax cuts.

2.1 DPEC v. Governments Many governments, especially those in the Western Europe, target gasoline for high taxes. For example, more than 50% of the gasoline prices in Britain, France and Germany are government taxes. Gasoline taxes are designed to reduce congestion and pollution; most importantly, they bring governments tax revenue. At the time of writing, there has been a significant surge in crude oil prices, which subsequently lead to high gasoline prices around the world. The organization for petroleum exporting oountries {OPEC} has agreed to increase supply, but also urged governments around the world to reduce gasoline taxes. In face of widespread protests by consumers, the French government has suocumbed to cut gasoline tax for powerful groups such as lorry drivers and farmers. ftaly and the Netherlands have promised to offer similar tax cuts. Dther European governments are trying to hold firm to oonsumers' request for tax cuts. {"Burning Issue." Economist, September 23, 2001}, page 18. "No Easy Exit." Economist, September 23, 20311}, pages 6869.} a. Illustrate how a supply increase of gasoline, say due to higher utilization of existing facilities by the OPEC, would affect the buyer and seller surpluses. b. Show how a cut in gasoline tax would affect the buyer and seller surpluses, and explain why the govern menu are reluctant to offer tax cuts