Automobile emissions generate pollution and cause higher costs and discomfort to residents of a city.In this case:
A) too few of society's resources are being used to operate automobiles.
B) the externality can be internalized into the market by imposing a specific tax on drivers.
C) there is an external benefit to society from operating automobiles.
D) the externality can be internalized into the market by granting a specific subsidy to drivers.

Question

Quizplus · Accepted Answer

Imposing a specific tax on drivers who produce emissions would force them to pay for the negative externality they create, thereby internalizing the cost of the pollution. This would also provide an incentive for drivers to switch to more environmentally friendly modes of transportation or invest in technology that reduces emissions.

Automobile Emissions Generate Pollution and Cause Higher Costs and Discomfort