When the Production of a Good Creates an External Cost

question 264

Multiple Choice

When the production of a good creates an external cost, by setting the tax rate equal to the ________, firms can be made to behave in the same way as they would if they bore the cost of the externality directly.

• A) marginal external cost
• B) marginal social benefit
• C) marginal private benefit
• D) marginal social cost

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Definitions:

Responsible

Being accountable or answerable for something within one's power, control, or management.

Becoming a Parent

The transition into parenthood, marked by the birth or adoption of a child and the associated changes in identity and responsibilities.

Accepting Decisions

The process of understanding, agreeing with, and moving forward with a choice or resolution.

"Person Who" Fallacy

The incorrect assumption that knowing an individual fits into a particular category (e.g., a personality type) allows for accurate predictions of that person's behavior in various situations.