Figure 10-7 -Refer to Figure 10-7. to Internalize the Externality in This

question 284

Multiple Choice

Figure 10-7
-Refer to Figure 10-7. To internalize the externality in this market, the government should

• A)impose a tax on this product.
• B)provide a subsidy for this product.
• C)forbid production.
• D)produce the product itself.

---

Definitions:

Capital

Resources or assets that are used in the production of goods and services, including physical assets like machinery and buildings, and intangible assets like patents.

Fixed-Proportion

A production process in which the inputs are used in fixed ratios, with no substitution possible between them.

Perfect Substitutes

Goods or services that can be used in exactly the same way, where the consumer is indifferent between the two and will choose the cheaper one.

Scale

The size, extent, or level of something, typically used in the context of production or operations to indicate magnitude or capacity.