Suppose the government imposes a tax in a certain market in order to internalize an externality. This type of policy is based on which of the Ten Principles of Economics?

a. People face trade-offs.
b. People respond to incentives.
c. Markets are usually a good way to organize economic activity.
d. The cost of something is what you give up to get it.


b

Economics

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The investment by firms in the creation of products not yet available on the market is referred to as:

A) working capital. B) creative capital. C) innovation funds. D) research and development.

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The real-balance effect shows that

A) aggregate demand is upward sloping. B) a higher price level leads to higher interest rates. C) a lower price level will increase the purchasing power of currency and increase personal consumption. D) consumption and the price level are positively correlated.

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In a common-value auction

a. No bidder knows what the exact value of the item being auctioned b. Each bidder knows the exact value of the item c. The value is different for each bidder d. All of the above

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