In the Presence of an Negative Externality,a Specific Tax Can

question 46

Multiple Choice

In the presence of an negative externality,a specific tax can achieve the social optimum because

• A) output is reduced to zero as a result.
• B) it internalizes the external cost.
• C) it directly charges the producer for polluting.
• D) the price of the good rises by the full amount of the tax.

---

Definitions:

Unlimited Liability

A legal obligation where business owners and investors are personally responsible for all of the debts of the business.