Which of the Following Illustrates the Principle of Second Best

question 85

Multiple Choice

Which of the following illustrates the principle of second best?

• A) The government imposes taxes on cigarettes and the tax revenue collected is used to pay for health care.
• B) The government decides to impose taxes on all automobiles rather than imposing a tax only on luxury automobiles.
• C) The government imposes a tax on a meat processing plant that equals the cost of cleaning the lake damaged by the waste discharged into the lake by the meat processor.
• D) A tax imposed on land, because this tax distorts economic decisions less than taxes on other factors of production.

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Definitions:

Independent Variables

Factors in an experiment that are manipulated or changed to observe their effects on dependent variables.

SST

Total Sum of Squares, a measure of the total variance in a dataset, used in the context of regression analysis to assess the variability of data points.

SSR

Sum of Squares due to Regression, representing the variation explained by the regression model.

SSE

Sum of Squares due to Error, a measure used in statistics to quantify the variance within a dataset, representing the discrepancy between the observed and estimated values.