When the Production of a Good Creates an External Cost

question 225

Multiple Choice

When the production of a good creates an external cost, one method of achieving the efficient allocation is to impose a tax such that

• A) MC + tax = MSC.
• B) MC - tax = MSB.
• C) MB + tax = MSC.
• D) MB - tax = MSB.

---

Definitions:

Criterion

A principle or standard by which something can be judged or decided.

ANOVA Table

A tabular display used in analysis of variance to summarize the sources of variability among different groups and within groups, helping to determine if there are significant differences.

F-test

A statistical procedure that compares the variances between two samples to assess if they originate from populations with identical variances.

Random Variable

A variable that takes on various numerical values, each associated with a certain probability, representing outcomes of a random phenomenon.