In summarizing the research on the externalities associated with driving cars,a 2007 Journal of Economic Literature article concluded that the optimal corrective tax on gasoline in the United States would be
A) $0.40 per gallon.
B) $0.90 per gallon.
C) $2.10 per gallon.
D) $3.30 per gallon.

Question

Quizplus · Accepted Answer

According to the article mentioned in the question, the optimal corrective tax on gasoline in the United States would be $2.10 per gallon. This means that the externalities associated with driving cars, such as pollution and congestion, would be reduced to the socially optimal level if the tax on gasoline was increased by $2.10 per gallon. This would also incentivize individuals to use alternative modes of transportation, such as biking or public transit, which would further reduce externalities associated with driving cars.

In Summarizing the Research on the Externalities Associated with Driving