When the Government Taxes a Firm That Generates External Costs

question 56

Multiple Choice

When the government taxes a firm that generates external costs, the firm will produce

• A) more units of output than before the tax was imposed in order to continue maximizing profits.
• B) the same number of units of output as before the tax was imposed to continue maximizing profits.
• C) fewer units of output than before the tax was imposed in order to continue maximizing profits.
• D) either more or fewer units of output than before the tax was imposed depending upon what happens to the profit-maximizing level of output.

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Definitions:

Supply Chain Management

The oversight and management of the flow of goods and services from the point of origin to the point of consumption.

Competitive Advantage

A situation or factor that gives a business an advantage or superior standing over its rivals in the industry.

True Differentiation

The process of making a product or service stand out as unique among competitors in the eyes of the target market through real, significant differences.

Service Demand

The need or desire for intangible products such as skills, expertise, or activities that provide value or benefit to consumers.