For Which of the Following Goods Would the Imposition of a Tax

question 73

Multiple Choice

For which of the following goods would the imposition of a tax most likely improve the efficiency of the market outcome?

• A) the production of a good with external benefits
• B) the production of a rival good with no external costs
• C) the production of a good with external costs
• D) the production of a public good

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Definitions:

Residual Income

The income that remains after deducting all required costs of capital from operating income, used as a measure of profitability.

Margin

Margin refers to the difference between the selling price of a good or service and its cost of production, usually expressed as a percentage of the selling price.

Return On Investment

A gauge of an investment's profit, expressed as the return percentage in comparison to the cost of the investment.

Residual Income

Residual income is the profit remaining after deducting all required costs of capital from operating income.