Read the following statement carefully and identify the inference that follows.
Statement: The government has announced a new tax on sugary drinks.
Inference:
I. The government is trying to reduce the consumption of sugary drinks.
II. The tax will generate revenue for the government.
III. The tax on sugary drinks will be the only tax imposed by the government.
Show answer & explanation
Correct answer: C
Explanation
Correct Answer = If both I and II follow
Assumption I (The government is trying to reduce the consumption of sugary beverages): This follows. According to public policy principles, when the government taxes harmful or health-threatening goods (such as sugary drinks, tobacco, etc.), its primary purpose is to discourage consumption by raising their prices. This is often called a 'sin tax.'
Assumption II (This tax will generate revenue for the government): This also follows. The very nature of a tax is that it adds money to the government treasury. Whether the objective is to reduce consumption or not, the imposition of any new tax automatically generates revenue for the government.