The Environment Ministry in Japan proposed a new carbon tax to meet Japan's obligations to reduce carbon dioxide emissions under the Kyoto Treaty. The tax would be levied on producers and importers of fossil fuels and raise the cost of using fossil fuels. How do most economists view a tax such as this?
A. They do not believe any government intervention is necessary because the invisible hand of the market will correct the problem.
B. They prefer voluntary programs to taxes because they reduce the role of compulsion.
C. They prefer direct regulation to taxes because taxes create deadweight loss.
D. They support taxes on pollution as a way of prompting decision makers to consider all costs.
Answer: D
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A) are very good at estimating risks. B) are not very good at estimating risks. C) are better than large corporations at estimating risks. D) do not even attempt to estimate risks.
A reason why there is more competition among restaurants than among large discount department stores is that restaurants
A) have more elastic demand for their product compared to department stores. B) unlike department stores, do not have significant economies of scale. C) unlike department stores, have to abide by government sanitation rules. D) have to cater to a variety of consumer tastes while department stores do not.
One advantage of a money market mutual fund account is that: a. it is guaranteed for a larger amount than are FDIC-insured deposits
b. it is a riskless asset. c. its holders typically earn more interest than they can with a regular bank account. d. it earns high interest and is liquid. e. it is completely liquid and riskless.
Suppose in Country X, anticipating high inflation in the economy, wages of workers are increased in the beginning of a financial year. However, prices remain unchanged during the year. Everything else remaining constant, which of the following will be observed in this economy?
a. The cost of labor, that is the real wage will decline b. The current profits of the firm will rise c. Aggregate supply in the economy will increase d. Annual production in the economy will remain unaffected e. The aggregate supply curve will move to the left