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Negative externalities of burning gasoline

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Question: Burning gasoline generates negative externalities. Assume the current tax on gas in the country of Optiland fully internalizes these externalities. But suppose that gas prices in Optiland have risen lately due to increased demand. A politician gives a speech in which he says that the best response to rising gas prices is to eliminate the gas tax temporarily. Do you agree with his position? Use a graph to support your answer.

Reference no: EM131581482

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