Oil spills occur often, imposing costs on those who do not necessarily benefit from the production or consumption of that oil. A tax to internalize this negative externality, is likely going to a. increase the price of that good and reduce pollution. b. increase the price of that good and increase pollution. c. reduce the price of that good and decrease pollution. d. reduce the price of that good and increase pollution.
Answer
a. increase the price of that good and reduce pollution
The price is going to reduce because the expense rises and must be covered by the revenue that is generated from the c ommodity sales
Explanation
As the expense goes up, the cost of the commodity will rise and this is why the price of oil can increase if there is a tax to ensure the cost that is incurred when there is oil spills, is catered for. The burden is turned to the consumer who has to pay higher prices for the same commodity in order to avail an added value that caters for the added tax
