The gas-guzzler tax that is placed on new vehicles that are very fuel inefficient is an example of ?
Correct answer: D. an attempt to internalize a negative externality.
- A. a tradeable pollution permits.
- B. an attempt to internalize a positive externality
- C. an application of the Coase theorem
- D. an attempt to internalize a negative externality.
Explanation
Fuel-inefficient vehicles impose pollution costs on people who are not involved in the purchase, creating a negative externality. A gas-guzzler tax makes buyers or producers bear more of this social cost, thereby internalizing it.
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