A tax credit for a clean fuel vehicle
A) acts as a subsidy to encourage consumption, by increasing the MPB
B) can be modeled as a shift up of the MEB
C) is represented as a shift down of the MPB by the amount of the tax credit
D) raises the effective price of the vehicle, discouraging consumption

Question

Quizplus · Accepted Answer

A tax credit for a clean fuel vehicle acts as a subsidy to encourage consumption by effectively reducing the cost to the consumer, thereby increasing the Marginal Private Benefit (MPB) as it makes the vehicle more attractive financially.

A Tax Credit for a Clean Fuel Vehicle