To Totally Internalize an Externality, a Government Can Levy a Tax

question 2

Multiple Choice

To totally internalize an externality, a government can levy a tax related only to the physical quantity of pollution if

• A) the economic damages associated with the pollution are different across different locations.
• B) the economic damages are too large to be determined.
• C) the economic damages associated with the pollution are the same across different locations.
• D) the economic damages are zero.

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Definitions:

Residual Value

The market value of the leased property at the expiration of the lease. The estimate of the residual value is one of the key elements in lease analysis.

Financing Decision

The process of making choices about obtaining capital and using it to fund business activities, including investments and operations.

Capital Budgeting Decision

A capital budgeting decision involves the process of deciding whether to pursue a long-term investment or project based on its potential financial returns.

Lease Financing

A method of financing where a firm obtains the use of certain assets through leasing, avoiding the need to invest capital in them.