If a corrective tax on gasoline results in the efficient output of gasoline by internalizing negative externalities associated with pollution:
A) pollution from gasoline will increase because people are also harmed by the tax.
B) there will be no effect on pollution from gasoline because the tax is paid by the supplier.
C) pollution from gasoline will be zero because environmental cleanliness is priceless.
D) the tax will generate enough revenue to compensate society for the damages resulting from the pollution that still occurs.

Question

Quizplus · Accepted Answer

A corrective tax internalizes the external cost of pollution, leading to a more efficient output level. The tax revenue can be used to compensate society for the remaining pollution damages.

If a Corrective Tax on Gasoline Results in the Efficient