Some Policymakers Have Argued That Products Like Cigarettes, Alcohol, and Sweetened

question 121

Multiple Choice

Some policymakers have argued that products like cigarettes, alcohol, and sweetened soft drinks generate negative externalities in consumption.If the government decided to impose a tax on pop, the government will cause

• A)consumers to internalize the externality.
• B)producers to internalize the externality.
• C)the external cost to drinking pop to become a private cost paid by the government.
• D)the external cost to drinking pop to become a private cost paid by producers.

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Definitions:

Medium of Exchange

An intermediary instrument or system used to facilitate the sale, purchase, or trade of goods between parties.

Measure of Value

A function of a medium of exchange that allows it to serve as a common denominator to express the value of goods and services.

Demand Deposits

Bank accounts from which deposited funds can be withdrawn at any time without any notice to the institution, such as checking accounts.

Fed

Refers to the Federal Reserve System, which is the central banking system of the United States, responsible for monetary policy.