Consider a Setting in Which There Is a Negative Externality,but

question 73

Multiple Choice

Consider a setting in which there is a negative externality,but no positive externality.The market outcome is __________________; government can bring about the ___________________ outcome if it sets a tax equal to the __________________.

• A) efficient; inefficient; MSC
• B) efficient; inefficient; MEC
• C) inefficient; efficient; MEC
• D) inefficient; efficient; MPC
• E) inefficient; efficient; MSB

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Definitions:

Taxes On Interest Income

Taxes applied to income gained through interest from savings or investments.

Interest Rate

The amount charged by lenders to borrowers for the use of assets, expressed as a percentage of the principal, typically on an annual basis.

Managed Mutual Funds

Investment funds that are professionally managed, allocating collected investor money across various securities like stocks and bonds for a fee.

Index Funds

A type of mutual fund or exchange-traded fund (ETF) designed to track the components of a market index, such as the S&P 500, thereby providing broad market exposure.