If Markets Are Perfectly Competitive and Production of a Good

question 80

Multiple Choice

If markets are perfectly competitive and production of a good results in water pollution, the imposition of a tax on that good will:

• A) increase both the price of that good and pollution.
• B) reduce the price of that good and increase pollution.
• C) reduce both the price of that good and pollution.
• D) increase the price of that good and reduce pollution.

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Definitions:

Incremental Value

The additional value or benefit gained from undertaking a new project or investment, compared to not doing it.

Cash Deal

A type of financial transaction where the payment for goods or services is made in cash at the time of the deal, without using credit.

Incremental Value

The additional value generated by undertaking a particular action, such as an investment or project.

Shares Outstanding

The total number of a company's shares of stock that are owned by shareholders, including both public investors and company officers or insiders.