Economic Analysis of Social Issues 1st Edition by Alan Grant

Exercise 23

Suppose that the U.S. government increases its federal excise tax on gasoline to $5 per gallon. Explain the likely impact of that tax, if any, on (a) conservation, (b) oil exploration, and (c) the development of substitutes for gasoline. Is such a tax likely to increase or decrease the number of years until oil is depleted?