Suppose the Price of Gasoline Is $1

Multiple Choice

Suppose the price of gasoline is $1.25 per litre, the quantity of gasoline demanded is 40 billion litres per year, the price elasticity of demand for gasoline is -0.06, and the federal government decides to increase the excise tax on gasoline by $0.75 per litre, which increases the price of gasoline by $0.50 per litre.How much revenue does the federal government receive from the tax?

A) $19.61 billion
B) $27.51 billion
C) $29.41 billion
D) $30.39 billion