When the Production of a Good Creates an External Cost

question 28

Multiple Choice

When the production of a good creates an external cost, in order for taxes to be effective in achieving the efficient allocation of resources, the tax must be set equal to the

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

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Definitions:

Strategic Merger

The combination of two companies with the aim of achieving long-term strategic goals and enhancing value.

Consolidation Merger

The combination of two or more companies into a completely new entity, with the original companies ceasing to exist.

Congeneric Merger

A type of merger between companies in related industries or sectors, aimed at diversification or enhancing competitive strengths.

Horizontal Merger

A business consolidation that occurs between firms operating in the same industry, often as competitors.