Question

19. Carbon dioxide emission from gasoline used in vehicles generates a negative externality. How many of the following policies could potentially reduce the negative externality problem? Increases in gasoline taxes Replacing existing roads with toll roads Subsidies for low-emission or high gas mileage vehicles a) 1 b) 2 c) 3 d) None of these policies could reduce the negative externality problem

Answer 1

Option C. 3

Explanation: Policy 1 would make it costlier to use gasoline and reduce its consumption. Policy 2 would reduce overall vehicle journeys. Policy 3 would reduce the cost of innovative vehicles.