When External Costs Are Present and the Government Imposes a Tax

question 282

Multiple Choice

When external costs are present and the government imposes a tax equal to the marginal external cost, then

• A) efficiency can be achieved.
• B) transaction costs will be high.
• C) the marginal benefit of the external cost will fall.
• D) property rights must have already been established.

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Definitions:

Commission Charges

Fees charged by brokers or agents for their service in facilitating a transaction, often a percentage of the sale value.

Total Cost

The complete amount of money spent on producing or acquiring a product or service, including all variable and fixed expenses.

Par Value

The face value of a bond or stock as stated by the issuing company.

Dividend Per Share

The amount of dividend that a company pays out for each share of its stock over a designated period.