Assume That a 50 Per Cent Petrol Tax Led to a Large

Multiple Choice

Assume that a 50 per cent petrol tax led to a large increase in its price and only a small decrease in the quantity of petrol demanded.Economic analysis would lead one to conclude that________.

A) petrol should be taxed because the benefits of the tax would exceed the costs.
B) petrol should not be taxed because the benefits are uncertain.
C) petrol should not be taxed on ethical grounds since ethical benefits and costs cannot be measured.
D) the benefits of taxing petrol is a normative issue.Economic analysis can be used to contribute to discussion of this issue but cannot decide it.