If a Corrective Tax on Gasoline Results in the Efficient

question 32

Multiple Choice

If a corrective tax on gasoline results in the efficient output of gasoline by internalizing negative externalities associated with pollution:

• A) pollution from gasoline will increase because people are also harmed by the tax.
• B) there will be no effect on pollution from gasoline because the tax is paid by the supplier.
• C) pollution from gasoline will be zero because environmental cleanliness is priceless.
• D) the tax will generate enough revenue to compensate society for the damages resulting from the pollution that still occurs.

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