Export Tax Lowers Domestic Fuel Prices

Steps:

• Identify the goal: Governments tax exports to influence supply and prices domestically.
• Analyze effect: Tax raises export costs, making foreign sales less attractive.
• Result: More fuel remains in the domestic market, increasing local supply.
• Outcome: Higher supply drives down domestic fuel prices for consumers.

Why C is correct:

• Export taxes restrict outflows, boosting domestic supply per basic supply-demand law, which lowers prices for local users.

Why the others are wrong:

• A: Tax discourages exports but doesn't directly spur refinery production.
• B: Reducing exports of a key good worsens the trade balance by cutting export revenue.
• D: Tax generates revenue, increasing budget surplus or reducing deficit, not the reverse.

Final answer: C