Answer the following questions true (T) or false (F)
1. When negative externalities exist, the competitive market supply curve does not include all of the costs borne by members of society.
2. When a tax on output is imposed to internalize the external costs of pollution, the supply curve shifts down by the amount of the tax.
3. One problem with using a command-and-control approach to pollution reduction is that the monitoring costs may be too high.
1. TRUE
2. FALSE
3. TRUE
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The definition of efficiency implies that production is carried out on the production possibilities frontier.
Answer the following statement true (T) or false (F)
Which of the following contributed to the sharp increase in Federal tax revenues between 1995 and 2001?
A) an increase in income tax rates B) a sustained economic expansion C) increased income inequality D) all of the above
If Congress decides to reduce the tax per pack paid by sellers of cigarettes, other things being equal, the price of cigarettes will fall. This fall in prices can be attributed a(n):
a. upward movement along the supply curve for cigarettes. b. rightward shift of the supply curve for cigarettes. c. downward movement along the demand curve for cigarettes. d. leftward shift of the supply curve for cigarettes.
The federal budget deficits of the 1980s
A. are about the same as those of earlier decades. B. caused the government debt to increase in absolute terms but not as a percent of GDP. C. were due to the persistent recession that occurred throughout the 1980s. D. were caused by rising expenditures and tax cuts.