d) Briefly describe how this example illustrate tradeoffs in taxation.

Price 3) Excise Tax (7 points) The figure to the right shows a hypothetical $11 market for gasoline, with the quantity in $10 thousands of gallons. The government has decided to place an excise tax on gas but is trying $9 to determine what level to set the tax. $8 $7 Tax wedges have been added to help visualize the various tax levels. Remember the height of the $6 wedge indicates the per-unit tax amount. $5 $4 a. Complete the table below to show the $3 outcomes for the various tax levels shown. Remember that the quantity is in $2 thousands of gallons. $1 0 The first row is completed as an example. 20 40 60 80 100 120 140 160 Quantity (thousands of gallons) Tax Rate Quantity Sold Government (per gallon) (gallons) Deadweight Loss ($) Revenue ($) $1 60 thousand $60,000 $5,000 $2 $3 $4 $5 b. Suppose you are advising the policymakers. If the government's goal is to raise as much revenue as possible while keeping deadweight loss minimal, at what level would you recommend they set the tax, and why? c. If the government's goal is to reduce consumption of gasoline in addition to raising revenue, at what level of tax do you recommend, and why