Figure 10-2 -Refer to Figure 10-2.Suppose That the Production of Plastic Creates

question 308

Multiple Choice

Figure 10-2
-Refer to Figure 10-2.Suppose that the production of plastic creates a social cost which is depicted in the graph above.If the government wanted to force the firm to internalize the cost of the externality,what action should it take?

• A) Impose a tax of $1.50 per unit of plastic.
• B) Impose a tax of $2 per unit of plastic.
• C) Impose a tax of $6 per unit of plastic.
• D) Offer a subsidy of $1.50 per unit of plastic.

---

Definitions:

Independent Variable

In an experiment or study, the variable that is manipulated or controlled to test its effect on the dependent variable.

Predict

To declare or indicate in advance; especially, to foretell based on observation, experience, or scientific reason.

Variable

A characteristic, number, or quantity that can be measured or quantified and can vary among individuals or over time.

Least Squares Line

A straight line that minimizes the sum of the squared differences between the observed values and the values predicted by the line.