An appropriate government policy toward negative externalities is to
a. subsidize the activity that creates the negative externality.
b. impose a tax or fine on the activity that creates the negative externality.
c. pay money to the party that creates the negative externality.
d. impose a tax on recipients of the negative externality.
b
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A production quota on tobacco lowers the price of tobacco and the marginal cost of producing it
Indicate whether the statement is true or false
When the government decides to impose a tax on sellers of a good or service, sellers try to pass the tax on to consumers by raising the price of the good being sold
Assume the government decides to place a $1 tax on each unit of a good sold, e.g., tires. Using the simple model of supply and demand, illustrate what would happen to the price and quantity of tires sold. Would the amount of tax paid by the consumer (as opposed to the producer) be greater when demand is elastic or inelastic? Why?
If perfect competition existed everywhere, along with frictionless exchange, perfect information, and constant returns to scale,
a. consumers would carry out transactions directly with resource suppliers b. firms would not have the information necessary to calculate marginal productivities of resources c. entrepreneurs would be needed to collect information d. consumers would produce output and then engage in barter e. the economy would be organized into one large firm
In early 2008, the central bank of Zimbabwe announced the inflation rate in that country had reached
a. 60 percent. b. 80 percent. c. 220 percent. d. 24,000 percent.