When Producers Operate in a Market Characterized by Negative Externalities

question 307

Multiple Choice

When producers operate in a market characterized by negative externalities, a tax that forces them to internalize the externality will

• A)give sellers the incentive to account for the external effects of their actions.
• B)increase demand.
• C)increase the amount of the commodity exchanged in market equilibrium.
• D)restrict the producers' ability to take the costs of the externality into account when deciding how much to supply.

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Definitions:

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The branch of biology that studies the origins and changes in the diversity of life over time.

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Significant occurrences or happenings, especially those that mark a particular period or are of historical importance.

Nonvascular Plants

Plants that lack a vascular system consisting of xylem and phloem, including mosses, liverworts, and hornworts.

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The process by which organisms adjust to changes in their environment to survive and reproduce, often involving genetic, behavioral, or physical modifications.