Which of the following statements is false?
A. A subsidy can be used to internalize a negative externality; a tax can be used to internalize a positive externality.
B. Ronald Coase stressed the reciprocal nature of externalities.
C. One way to deal with negative externalities is for government to apply regulations directly to the activity that generates the externalities.
D. Simply because taxes and subsidies are sometimes used to adjust for negative and positive externalities, respectively, it does not necessarily follow that the socially optimal level of output will be reached.
Answer: A
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The two most important actors of the economy are:
A. land and capital. B. households and firms. C. firms and capital. D. exports and imports.
Why is the demand for foreign currencies known as a derived demand?
If UIP holds and the home currency is expected to appreciate by 4%, then the home interest rate is:
a. 6% b. 5% c. 4% d. Not enough information is provided to answer the question
Refer to Figure 15-7. Suppose the economy is in short-run equilibrium above potential GDP, the unemployment rate is very low, and wages and prices are rising
Using the static AD-AS model in the figure above, the correct Fed policy for this situation would be depicted as a movement from A) A to E. B) B to C. C) C to D. D) C to B. E) A to B.