Ask Question
23 February, 02:41

Due to the decrease in the level of water in the lakes of Chapel Hill, the local government wants to reduce the consumption of tap water. They are evaluating two alternatives: to impose a minimum price per gallon of tap water consumed that is five cents greater than the actual price, or to impose an excise tax of five cents on consumption of tap water. Assume that this market is originally in equilibrium. Which of these two alternatives will deliver a bigger reduction in the quantity consumed

+3
Answers (1)
  1. 23 February, 04:01
    0
    The correct answer is the first option: To impose a minimun price per gallon of tap water consumed that is five cents greater thant the actual price.

    Explanation:

    To begin with, if the local government is looking forward to reduce the consumption of the tap water due to the decrease in the level of water in the lakes of Chapel Hill, then it must impose a minimum price per gallon of tap water consumed that is five cents greater than the actual price due to the fact that when the citizens continue to consume the tap water they will have to pay 5 cents more every time the exceed the gallon of water consumed, therefore paying more than one time the 5 cents extra in the consumption instead of paying just one single time the 5 cents due to the simple consumption of water as it is suggested in the other option.

    To sum up, if the government charges 5 cents more every gallon of water then the people will decrease their consumption because everytime they passed the gallon of water then they will have to pay another extra 5 cents and so on.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Due to the decrease in the level of water in the lakes of Chapel Hill, the local government wants to reduce the consumption of tap water. ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers