Comment on the following statement: "Taxes on externality-producing activities are generally used to eliminate externalities."
What will be an ideal response?
The statement is false. Taxes are used to force decision makers to consider the full costs of their actions. This does not mean that the decision maker will decide to stop the externality-producing activity but he will generally scale back the activity.
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One way to sidestep the debate over whether the government should increase spending during economic downturns is to:
A. cut government spending so the government has no ability to spend money. B. return to the gold standard so that the value of the U.S. dollar remains strong. C. identify projects that nearly everyone can agree the government should fund. D. raise taxes so that the government has the money it needs for additional spending.
Explain why a price ceiling, when applied to a market, inevitably generates chronic excess demand for the good
If the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,
a. there is a surplus and the interest rate is above the equilibrium level. b. there is a surplus and the interest rate is below the equilibrium level. c. there is a shortage and the interest rate is above the equilibrium level. d. there is a shortage and the interest rate is below the equilibrium level.
If the labor market becomes less efficient so that the unemployed are more slowly matched with jobs, then
A. the natural rate of unemployment will decrease. B. the natural rate of unemployment will not change. C. the natural rate of unemployment will increase. D. the natural rate of unemployment could either increase or decrease.