Review
4. The diagrams below show the competitive market for gasoline in
two countries, Midas and Neptune. In Midas, demand is perfectly
inelastic; in Neptune, demand is relatively elastic. In both
countries, supply is identical and upward sloping. The
government in each country imposes an excise tax of $t per litre
on the producers of gasoline. This tax shifts the supply curve up
by $t.