1. A pollution tax on automobiles provides an incentive to buy ___, maintain _, drive _____, and...

Question:

1. A pollution tax on automobiles provides an incentive to buy _______, maintain _______, drive _______, and use alternative _______.
2. Arrows up or down: A gasoline tax will shift the supply curve for gasoline _______, causing the equilibrium price to _______and the equilibrium quantity to _______.
3. A gasoline tax will be shifted forward to _______ and backward to _______, such as the suppliers of _______.
4. To internalize the external cost associated with automobile emissions that cause urban smog, the appropriate gasoline tax is about _______ ($0.20/$0.40/$0.80/$1.00) per gallon.
5. To internalize the external cost associated with traffic collisions, the appropriate VMT tax is about _______ ($0.01/$0.02/$0.04/$0.20) per mile.
6. The external accident cost per mile for the typical young driver is about _______ (1/3/6/11/15) cents, compared to _______ (1/3/6/11/15) cents for a driver between the ages of 25 and 70.
7. Youngsters Pay to Drive. The demand for automobile travel by the typical young driver (age less than 25 years) is linear, with a vertical intercept of $1.00 per mile and a horizontal intercept of 200 miles per week. Initially, the cost of automobile insurance is a fixed weekly sum, independent of mileage. The average cost of driving for gasoline, oil, maintenance, and repair is constant at $0.20 per mile.
a. Use a graph to show the driver s choice of how many miles to drive, labeled as point a.
b. Use the data in Table in the application Young Drivers and Collisions to show the socially efficient outcome, labeled as pointb.