Briefly discuss the benefits and drawbacks associated with using a corrective tax to control pollution.
What will be an ideal response?
Using taxes to internalize external costs is appealing because it allows the relatively efficient private sector to operate according to market forces in a manner that takes socially important spillover costs into account. A major objection to the use of such taxes and subsidies is that, in most cases, it is difficult to measure externalities with any precision. Choosing a tax rate involves some guesswork, and poor guessing might lead to a solution that is far from optimal. Even so, it is likely to be better than ignoring the problem. In spite of the severe difficulties in measurement, many economists would like to see greater effort made to force internalization of externalities through taxes rather than using alternative approaches. Why? We know that firms will seek out the least-expensive (in terms of using society’s scarce resources) approaches to cleanup because they want more profits.
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Firms are most likely to set an efficiency wage above the competitive wage if
A. the firm is not concerned with maximizing profits. B. workers refuse to work at the competitive wage. C. the firm does not know what the competitive wage is. D. most of its workers are not educated. E. firms find it expensive to monitor worker output.
Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization?
A. division of labour B. international trade C. economies of scale D. command economy
In perfect competition, no individual producer can influence price because
a. each contributes an insignificant amount to total supply. b. they are ignorant of the market price. c. it is set by monopolists. d. it is regulated by the government.
Britain's decision to exit the ERM in September 1992 had what effect?
A) Lower interest rates and a depreciated exchange rate caused the British economy to expand. B) It subjected Britain to a ruling by the European Courts of Justice. C) It caused the system to collapse. D) It had no effect on Britain's economy.