Government Can Correct for Negative Externalities by

question 262

Multiple Choice

Government can correct for negative externalities by

• A) decreasing taxes.
• B) increasing taxes or regulation.
• C) allowing the market system to correct the problem.
• D) decreasing the costs to those responsible for the externality.

---

Definitions:

Risk Free Rate

The rate of return on an investment with no risk of financial loss, often represented by government bonds.

Beta

A calculation of the extent to which a stock's price swings in comparison with the overall market.

Market Risk

The risk of losses in investments due to factors that affect the overall performance of the financial markets.

Unique Risk

Also known as unsystematic risk, it refers to the risk associated with a specific company or industry that can be mitigated through diversification.