hard · LSAT Logical Reasoning

Economist: A tax on carbon emissions will reduce those emissions only if firms cannot fully pass the tax's cost on to consumers. But in any market where consumer demand is highly inelastic, firms can fully pass such costs on to consumers. Therefore, in markets with highly inelastic demand, a carbon tax will fail to reduce emissions. The economist's reasoning is most vulnerable to criticism on the grounds that it

1. treats a condition that is sufficient for firms' passing on a cost as though it were also necessary for their doing so
2. infers that a carbon tax will not reduce emissions in a market merely from the claim that one route to such a reduction is unavailable in that market
3. presumes, without warrant, that consumer demand in every market is either highly inelastic or highly elastic, with no intermediate cases
4. overlooks the possibility that a carbon tax might reduce emissions in some markets even as it raises them in others
5. fails to consider that firms in markets with inelastic demand may have independent incentives to lower their emissions

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