Scenario 10-1 The Demand Curve for Gasoline Slopes Downward and the Supply

question 24

Multiple Choice

Scenario 10-1
The demand curve for gasoline slopes downward and the supply curve for gasoline slopes upward. The production of the 400th gallon of gasoline entails the following:
a private cost of $2.83;
a social cost of $3.12;
a value to consumers of $3.23.
-Refer to Scenario 10-1. Suppose the dollar amount of the externality, per gallon of gasoline, is constant, regardless of how much gasoline is produced. Then the externality could be internalized if producers of gasoline were

• A)provided a subsidy of $0.11 per gallon of gasoline sold.
• B)provided a subsidy of $0.29 per gallon of gasoline sold.
• C)required to pay a tax of $0.29 per gallon of gasoline sold.
• D)required to pay a tax of $0.11 per gallon of gasoline sold.

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Definitions:

Accountants

Professionals who perform financial functions related to the collection, accuracy, recording, analysis, and presentation of a business, organization, or individual's financial operations.

Tax Code

The system of laws and regulations that govern the levying of taxes on individuals, businesses, and other entities, which outlines the rates, exemptions, and enforcement policies.

Real Incomes

Income of individuals or nations adjusted for inflation, reflecting the purchasing power of the income.

Nominal Interest Payments

The amounts paid by borrowers to lenders as the cost of borrowing money, not adjusted for inflation.