When Producing a Good Creates Pollution, an External Cost, and the Government

question 93

Multiple Choice

When producing a good creates pollution, an external cost, and the government imposes a tax equal to the marginal external cost, then

• A) the amount of output moves farther away from the efficient amount.
• B) transaction costs will be high.
• C) the efficient amount of the good will be produced.
• D) property rights must have already been established.

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Definitions:

Bilateral

Pertaining to or involving two sides, parties, or countries, often used in the context of agreements or contracts that require obligations from both parties.

Unilateral

A mistake that is the result of an error by one party about a material fact, that is, a fact that is important in the context of the particular contract.

Offeror

An entity or person who puts forth a proposal or bid for a contract, indicating a willingness to enter into an agreement under specified terms.

Consideration

Something of value (such as money, services, or goods) that is exchanged between parties in a contract, making the agreement legally binding.