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

Question

Quizplus · Accepted Answer

Imposing a specific tax on drivers can internalize the negative externality by making drivers bear the social costs of pollution, thus reducing the overall level of emissions.

Automobile Emissions Generate Pollution, Have Costs, and Cause Discomfort to Residents