An Appropriate Government Policy Toward Negative Externalities Is to

question 133

Multiple Choice

An appropriate government policy toward negative externalities is to

• A)subsidize the activity that creates the negative externality.
• B)impose a tax or fine on the activity that creates the negative externality.
• C)pay money to the party that creates the negative externality.
• D)impose a tax on recipients of the negative externality.

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Definitions:

Accounts Payable

Liabilities or amounts owed by a business to its creditors for goods and services that have been received but not yet paid for.

Accounts Receivable

Financial obligations of customers to a firm for items or services rendered but not yet compensated.

Face Value

Refers to the nominal or dollar value printed on a financial instrument, such as a bond or stock certificate, representing its legal value.

Bond

An interest-bearing security that obligates the issuer to pay the bondholder a specified sum of money, generally at fixed intervals, and to repay the principal at maturity.