​A Rain Barrel Is a Container That Captures and Stores

question 47

Multiple Choice

​A rain barrel is a container that captures and stores rainwater for landscape and garden use during dry periods. Rain barrels provide an external benefit to the community through water conservation. What can the government do to equate the equilibrium quantity of rain barrels and the socially optimal quantity of rain barrels?

• A)​impose a tax on rain barrels that is equal to the per-unit externality
• B)​offer a subsidy on rain barrels that is equal to the per-unit externality
• C)​encourage homeowners to bargain with rain barrel producers
• D)nothing​

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Definitions:

Long-run Average Total Cost

The per unit cost of production when all inputs, including both fixed and variable costs, are adjusted to their optimal levels over time.

Automobile Manufacturing

The industry and process involved in designing, producing, marketing, and selling motor vehicles.

Ford Motor Company

An American multinational automaker founded by Henry Ford, known for revolutionizing the automobile industry.

Constant Returns to Scale

A condition where increasing all inputs by the same proportion results in an increase in output by that same proportion.