Air Pollution Creates a Negative Externality

question 49

Multiple Choice

Air pollution creates a negative externality.Which of the following results

• A)Welfare will be enhanced when some air pollution is eliminated.
• B)Social welfare is optimal when all air pollution is eliminated.
• C)Governments can regulate the market to eliminate all pollution.
• D)The free market result maximizes social welfare.

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Definitions:

General Sales Tax

A broad-based tax imposed on sales of goods and services, typically at the point of sale.

Laffer Curve

A theoretical representation showing the relationship between tax rates and the amount of tax revenue collected by governments.

Marginal Tax Rates

The percentage of tax applied to your income for each tax bracket in which you qualify, effectively the rate on the last dollar of income earned.

Tax Revenues

The income that is collected by governments through the imposition of various taxes, which is used to fund public services and policies.