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

Exercise 4

How would imposing a per-unit tax of $2,000 on each new U.S. automobile affect (a) higher-quality, higher-priced cars (those selling for more than the median price) compared with (b) lower-quality, lower-priced cars? What would happen as a result to the average quality of automobiles if the proceeds of the tax were used to subsidize a government-operated lottery?