1. A pollution tax on automobiles provides an incentive to buy
, maintain
, drive , and use alternative .
2. Arrows up or down: A gasoline tax will shift the supply curve for gasoline
, causing the equilibrium price to
and the equilibrium quantity to .
3. A gasoline tax will be shifted forward to and backward to
, such as the suppliers of
.
4. To internalize the external cost associated with automobile emissions that cause urban smog, the appropriate gasoline tax is about ($0.20/$0.40/$0.80/$1.00) per gallon.
5. To internalize the external cost associated with traffic collisions, the appropriate VMT tax is about
($0.01/$0.02/$0.04/$0.20) per mile.
6. The external accident cost per mile for the typical young driver is about(1/3/6/11/15) cents, compared to(1/3/6/11/15) cents for a driver between the ages of 25 and 70. (Related to Application 5 on page 697.)