Is a uniform per-unit tax on firms that cause an externality an optimal policy for correcting the externality? Explain
What will be an ideal response?
No. The concept of externality is about the economic costs rather than the amount of externality. The economic costs or damages can vary across different locations so that the optimal tax on pollution should also vary from location to location, depending on the size of economic damages.
You might also like to view...
Which of the following is not part of the pollution problem?
A. The absence of markets for goods like clean air and clean water B. The lack of well-defined property rights to clean air and clean water C. The unreliability of voluntary programs to cut pollution D. The willingness of citizens to take steps to reduce detrimental externalities
The time it takes to recognize a recession and implement a spending stimulus is called a
A. fiscal drag. B. multiplier. C. retroactivity. D. lag.
What type of relationship does the law of demand demonstrate?
A) direct B) positive C) inverse D) static
Which of the following is a common argument against allowing a foreign firm to operate a business in a developing country?
a. The foreign firm may gain control over national resources. b. Foreign productive expertise may outdistance domestic labor skills. c. The foreign firm may reduce domestic competition. d. Technology may be transferred from industrial countries to the developing countries. e. The foreign firm may reduce dependency on domestic imports.