Reference no: EM132511587

1. Earlier, we discussed the concept of a "subsidy"---in theory, our government could oversee a system wherein it would buy gasoline for $4 on the Supply Curve, then sell it to us for $2 on the Demand Curve, with the $2 differential being paid ---by us - in taxes. At 12 gallons per week (average quantity purchased per driver), this $2 per gallon subsidy works out to $24 per week more in taxes paid and thus over $1,000 paid in taxes per person per year---whether the person is aware of this or not. Everyone is entitled to their own opinion, but please give three reasons why, in theory, this may be a terrible idea.

2. We also discussed the idea that our government could distribute ten "coupons" to us every week, ten for each motorist, each week, good for ten gallons per week (along with the price we pay at the pump, of course). The idea would be that you and I could not buy ten gallons of gasoline unless we had ten coupons. Please discuss three reasons why THIS idea may not be a good idea.

3. In both cases, what is the GOAL of the government? What is our government trying to do trying to do, in each case?

4. IN YOUR OPINION, which idea, in theory, may be worse? The subsidy? Or the coupons? Why?