The government imposes a tax on an industry that produces goods creating a negative externality. Yet the industry produces more than the optimum quantity of output. This means
A) the tax is more than the external cost associated with the product.
B) the tax is less than the external cost associated with the product.
C) the company should advertise the product more.
D) the company should increase the production of the product.
Answer: B
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All of the following will cause the aggregate supply curve to shift to the right EXCEPT
A) discoveries of raw materials. B) a reduction in input prices. C) an increase in marginal tax rates. D) a reduction in international trade barriers.
If the primary goal in implementing a tax is to maximize efficiency and minimize deadweight loss, the government should impose a(n):
A. income tax. B. lump sum tax. C. sin tax. D. proportional tax.
Early settlers in the town of Dry Gulch drilled wells to pump as much water as they wanted from the single aquifer beneath the town. (An aquifer is an underground body of water.) As more people settled in Dry Gulch, the aquifer level fell and new wells had to be drilled deeper at higher cost. The town council has proposed putting a meter on each household's pump, and charging residents for each gallon of water used. This would:
A. have no effect on water use. B. reduce total economic surplus. C. discourage residents from using too much water. D. convert private property to public property.
The portion of planned aggregate expenditure that is independent of output is called ________ expenditure.
A. actual B. planned C. potential D. autonomous