The state needs to raise money, and the governor has a choice of imposing an excise tax

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The state needs to raise money, and the governor has a choice of imposing an excise tax of the same amount on one of two previously untaxed goods: the state can tax sales of either restaurant meals or gasoline. Both the demand for and the supply of restaurant meals are more elastic than the demand for and the supply of gasoline. If the governor wants to minimize the deadweight loss caused by the tax, which good should be taxed? For each good, draw a diagram that illustrates the deadweight loss from taxation.
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Microeconomics

ISBN: 978-1429283434

3rd edition

Authors: Paul Krugman, Robin Wells

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