When the Production of a Good Creates an External Cost

question 28

Multiple Choice

When the production of a good creates an external cost, in order for taxes to be effective in achieving the efficient allocation of resources, the tax must be set equal to the

• A) marginal private cost.
• B) marginal external cost.
• C) marginal social cost.
• D) marginal benefit of polluting.

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Definitions:

Amortization

The process of spreading out the cost of an intangible asset over its useful life or paying off a debt over time in regular installments.

Statement Of Cash Flows

A financial report that summarizes the amount of cash and cash equivalents entering and leaving a company, showing how the company manages its liquidity.

Independent Cases

Situations or examples that do not influence each other, often used in statistical analysis and probability theory.