If the Production of Ukuleles Creates a Negative Externality That

question 245

Multiple Choice

If the production of ukuleles creates a negative externality that is not corrected for by the government, the equilibrium quantity of ukuleles is

• A)higher than optimal.
• B)lower than optimal.
• C)efficient.
• D)at a optimal level.

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Definitions:

Ability-to-Pay Principle

A taxation principle that suggests taxes should be levied according to an individual's or entity's ability to pay, implying those with higher income should pay more taxes.

Taxes

Mandatory fiscal contributions or other forms of levies required from taxpayers by governmental bodies to support government expenditures and diverse public costs.

Regressive Tax

A tax system where the tax rate decreases as the taxable amount increases, placing a higher relative burden on lower-income earners.

Excise Tax

A tax levied on the manufacture, sale, or consumption of certain products or activities, often specific to certain goods like tobacco, alcohol, and fuel.