In a Market Economy, the Ideal Solution to the Problem

question 26

Multiple Choice

In a market economy, the ideal solution to the problem of externalities would be to:

• A) prohibit all production involving spillover costs.
• B) regulate both the amount people may consume and the price they pay for goods whose
• C) charge or tax producers of a good the precise marginal cost of the externality generated in production.
• D) offer subsidies to the industries causing a negative externality.

---

Definitions:

Activity Ratios

Financial metrics used to measure a company's ability to convert different accounts within its balance sheets into cash or sales.

Activity Ratios

Metrics that assess the efficiency with which a company utilizes its assets to generate revenue or sales.

Cash Flow

The total amount of money being transferred into and out of a business, specifically measuring its liquidity and financial health over a period.

Business Manager

An individual responsible for overseeing and directing the operations and activities of a business.