Suppose the nation wished to reduce gasoline consumption not only to promote national security, but also to reduce the threats from climate change.

a. How effective is a strategy relying on the labeling of the fuel efficiency of new cars likely to be? What are some of the advantages or disadvantages of this kind of approach?

b. How effective would a strategy targeting the retirement of old, fuel-inefficient vehicles be? What are some of the advantages or disadvantages of this kind of approach?

c. Would it make any economic sense to combine either of these polices with pay-asyou-

drive insurance? Why or why not?