Question

If the government places a tax on each gallon of gasoline produced, then this would cause a:________

Answer 1

movement up along the current supply curve of gasoline.

Step-by-step explanation:

The government can place taxes on producers or consumers. This is called legal tax incidence. However, just because the government intends for a tax to be on producers or consumers, doesn't mean it ends up that way. The group that ends up paying the tax depends on how the market responds to the tax. The economic tax incidence is the group that actually ends up paying the tax.