You are the Dean of the Faculty at St. Anford University.
September 3, 2020
The cost of capital for a firm, rWACC, in a zero tax environment is: A) equal to the expected EBIT divided by market value of the unlevered firm.
September 3, 2020

Who should pay the external costs of driving?

Driving a car has external costs. The health cost of pollution alone has been estimated between $.40 and $6.00 per gallon of gasoline consumed . (It is very difficult to measure the health costs. We are uncertain which health problems pollution causes and the cost of particular health problems are difficult to measure.)

“Should the external costs of driving cars be paid through a tax on gasoline?”

Identify  the  strongest  two  arguments  in  favor  of  such  a  tax  and  the  strongest  two arguments against such a tax.

for each side of the question  (in favor or against) list two strong arguments.  Use the following  concepts from  the applicable chapter(s):

Market Failure

Public Goods

Extrenalities Market Power

Government Failure

Cost-Benefit Analysis

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