Microeconomics 13th Edition by Russell Sobel, David Macpherson, Richard Stroup, James Gwartney

Exercise 7

Suppose the government established a new program that would use revenues from a payroll tax to finance 85 percent of the maintenance and repair cost of automobiles incurred by those who are employed. How would this legislation influence (a) the prices of auto repair and maintenance services, (b) total spending on these services, and (c) the cost of this program in the years immediately ahead? Do you think this program should be adopted? Why or why not?