An Optimal Tax on Pollution Would Result in Which of the Following

question 424

Multiple Choice

An optimal tax on pollution would result in which of the following?

• A)Producers will choose not to produce any pollution.
• B)Producers will internalize the cost of the pollution.
• C)Producers will maximize production.
• D)The value to consumers at market equilibrium will exceed the social cost of production.

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Definitions:

Excise Tax

A tax directly levied on certain goods, services, and activities such as tobacco, alcohol, and gambling.

Tax Structure

Specifies how a tax depends on the tax base; usually expressed in percentage terms.

Tax Base

The measure or value, such as income or property value, that determines how much tax an individual pays.

Taxation

The process whereby authorities impose financial charges on citizens or corporations to fund government spending and public expenditures.