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- Subject
- Externality & Internalityeconomics-mcqs › externality-internality
- Published
- 1 Jun 2019
- Last updated
- 28 May 2026
The gas-guzzler tax imposed on new vehicles with poor fuel efficiency serves as an example of which economic concept?
Multiple choice question for Externality & Internality. Select an option, then review the explanation below.
Explanation
The gas-guzzler tax targets vehicles that cause harm through excessive fuel consumption, which generates negative externalities such as pollution. This tax aims to incorporate the external costs into the vehicle price, thereby internalizing the negative externality.
More Externality & Internality MCQs
Practice related questions from the same subject.
- 1.What is the primary function of tradable pollution permits?
- 2.Roberto and Thomas share a university dorm room. Roberto enjoys playing loud music, valuing it at €100, while Thomas prefers silence, valuing peace at €150. Assuming Roberto has the legal right to play loud music and there are no costs involved in negotiation, which of the following best describes an efficient outcome to this externality issue?
- 3.Which of the following is not classified as a transaction cost borne by parties when negotiating to address a pollution externality?
- 4.According to the Coase theorem, under what condition can private individuals effectively resolve externality issues?
- 5.What type of external effect is created when a person purchases a vehicle in a heavily trafficked city?