When the Government Charges an Output Tax to Eliminate an Externality

question 42

Multiple Choice

When the government charges an output tax to eliminate an externality, it forces the manufacturer to ________ the negative externality.

• A)charge customers for
• B)internalize
• C)stop producing
• D)increase the production of

---

Definitions:

Indirectly

In a manner not directly caused by or resulting from something.

Related Parties

Transactions between related parties are those that occur between individuals or entities that have a close association, leading to potential conflicts of interest or non-arm's length transactions.

Personal Residence

A term referring to the primary living quarters owned and used by an individual or family for their personal use.

Taxpayers

Individuals or entities that are obligated to pay taxes to a governmental authority.