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allochka39001
10 days ago
8

Due to the decrease in the level of water in the lakes of Chapel Hill, the local government wants to reduce the consumption of t

ap 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
Business
1 answer:
harina [3.5K]10 days ago
6 0
The initial choice is the first option: To establish a minimum price per gallon of tap water consumed that is five cents higher than the current price. Explanation: If the local government aims to curb tap water consumption due to declining water levels in Chapel Hill’s lakes, it should implement a minimum price per gallon that exceeds the current rate by five cents. This strategy would ensure that every time residents exceed a gallon of water consumption, they incur an additional cost of five cents, potentially prompting them to reduce usage since they would end up paying multiple times the extra charge instead of just once.
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