A new tax on gasoline causes a reduction in the purchase of new vehicles with poor fuel economy.This is an example of what type of incentive?
A) negative direct
B) positive direct
C) negative indirect
D) positive indirect
E) The tax does not provide an incentive.

Question

Quizplus · Accepted Answer

The new tax on gasoline creates a negative indirect incentive for purchasing vehicles with poor fuel economy. The increased cost of gasoline serves as a disincentive for individuals to purchase cars that are not fuel-efficient, as they would have to spend more money on fuel in addition to the initial cost of the car. This is an example of an indirect incentive because the tax does not directly change the price of the vehicles, but rather indirectly changes consumer behavior by influencing their decisions based on the price of gasoline.

A New Tax on Gasoline Causes a Reduction in the Purchase