If a Tin of Sardines Creates a Noxious Odor for Non-Sardine-Eaters

question 244

Multiple Choice

If a tin of sardines creates a noxious odor for non-sardine-eaters equivalent to $1 per tin, the government could correct the odorous externality and achieve an efficient outcome by:

• A) taxing sardine tins at a rate of $1 per tin.
• B) subsidizing sardine tins at a rate of $1 per tin.
• C) capping total sardine consumption at 1000 tins per day.
• D) banning sardines.

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Definitions:

Expected Payoff

The anticipated return from an investment, considering all potential outcomes and their probabilities.

Sequential Game

A type of game in game theory where players make their moves one after another, with knowledge of the previous players' moves.

Incumbent Monopoly

A monopoly status characterized by a dominant player having a major share of the market, often resulting from having established infrastructure and customer base.

Potential Entrant

A firm or company that is not currently in a market but has the potential to enter if market conditions are favorable.