Karen Consumes Gasoline and Other Goods

Multiple Choice

Karen consumes gasoline and other goods. A new excise tax on gasoline raises the price. However, the government pays Karen an income subsidy that is just enough for her to stay on her original (pretax) indifference curve. Her new optimal consumption bundle will have:

A) the same amount of both goods as before.
B) less gas and more of other goods.
C) less of other goods and more gas.
D) This question can't be answered, since some essential information (such as Karen's income and the pretax and taxed prices of gas) is missing.