Question
Suppose that the Mexican Government decides not to implement the national soda tax after intense lobbying by Coca-Cola. Cuernavaca—a small metropolitan area outside of Mexico City—being fed up with inaction at the national level decides to implement its own tax to tackle the diabetes epidemic in its community.
What may cause this tax to fail at reaching its health goals?
What may cause this tax to fail at reaching its health goals?
A Cuernavaca is a large geographic region compared to Mexico nationally overall. Thus, citizens in Cuernavaca cannot avoid the tax by going outside of Cuernavaca’s geographical region to another city that doesn’t have the tax in place. A tax at the national level is much easier to avoid.
B There is nothing that can cause the tax to fail in reaching the defined health goals.
C Cuernavaca is a small geographic region compared to Mexico nationally overall. Thus, citizens in Cuernavaca can avoid the tax by going outside of Cuernavaca’s geographical region to another city that doesn’t have the tax in place. A tax at the national level is much more difficult to avoid.
D All of the available answers are correct.
This question is taken from Econ 101 – Microeconomics » Winter 2022 » Ch 6 Application Exercise Part 1
